The Committee considered evidence of the following incidents that arose owing to procedural contravention of Treasury Instructions and State Tender Board procedures.

1. The State Tender Board did not grant ex post facto approval for a tender amounting to R 57 585 for services rendered to the Department for the hosting of a conference.
2. R 42 134 - amount paid to consultants for services rendered. It was wrongly allocated against the vote. The expenditure was deemed unauthorised as a result of non-adherence to tender procedures.

SCOPA wishes to express its dissatisfaction at the non-compliance with the relevant regulations.

However, in written evidence on the above–mentioned instances of unauthorised expenditure, the Accounting Officer confirmed that:

• services for the expenditure were received to the satisfaction of the department;
• no individual benefited unduly from such expenditure and;
• control measures are in place to prevent this from reoccurring.

In the light of the above, the Committee recommends that Parliament approves the total amount of R 99 719 relating to the 1999/00 financial years.

Report to be considered

Expenditure totalling R166 634.60 was incurred during the 1995/96 and 1998/1999 financial years was regarded as unauthorised in terms of section 33 of the Exchequer Act, 1975 (Act No. 66 of 1975).

The Committee considered evidence on the following incidents that arose owing to procedural contravention of Treasury Instructions and State Tender Board procedures for which ex post facto approval had not been granted:

1. During the 1998-99 financial year an amount of R 97 253 represented unauthorised expenditure. This amount consisted of:

Printing cost for the urgent publishing and distribution of budget information. Exemption from normal tender procedures was requested but was not granted prior to the printing of the guide – R64 980.

Payment of temporary accommodation costs of five newly appointed employees in contravention of the Public Service Regulations – R32 273.00.

During the 1995-96 financial year, an amount of R69 381.60 represented unauthorised expenditure. This amount consisted of:

Payment for consultancy services in respect of research for the Department without observance of the State Tender Board regulations – R55 200.00.

Payment made to consultant to perform actuarial evaluation on the Closed Pension Fund on request of the trustees R14 181.60.

SCOPA, in its fourth report 1997, requested the Accounting Officer to submit:

• Further details concerning the service provided by the consultants and
• To determine whether the consultancy services were provided at the request of the Department of Trustees.

In detailed written evidence on the instances of unauthorised expenditure in both paragraphs 1.1 and 1.2 above, the Accounting Officers satisfactorily explained the circumstances in which each of the unauthorised expenditure took place, and confirmed that:

• Services for the expenditure was received to the satisfaction of the department;
• No individual has benefited unduly from such expenditure and;
• Control measures are now in place to prevent this from recurring.

In the light of the above, the Committee recommends that Parliament approve the total amount of R166 634.60 relating to the 1998-99 financial years.

Report to be considered

During the 2001/02 financial year an amount of R 5 898 000 represented unauthorised expenditure in respect of excess expenditure on a main division of the vote: Foreign Affairs. The main cost driver for the over expenditure was the devaluation of the Rand during the year in question, which the Department had no control.

In written evidence the Accounting Officer explained the circumstances in which unauthorised expenditure took place, and indicated that owing to the nature of unauthorised expenditure (i.e. exchange rate fluctuations) it was difficult to put preventative measures in place.

In the light of a previous SCOPA recommendation that Treasury should be consulted on this matter (14^th Report, 2001) and the advisory note of Treasury with respect to instances of unauthorised expenditure as contemplated in the PFMA, the Committee recommends that the amount in question be approved and that National Treasury advises SCOPA on the matter.

The Standing Committee on Public Accounts, having heard and considered evidence on the Report of the Auditor-General on a forensic audit investigation into the sale of non-ferrous scrap metal products of Transnet Limited (Transnet) [RP 179/2003], tabled in Parliament on 9 September 2003, reports as follows:

The hearing was based on allegations against Transnet for the awarding of a contract for the sale of scrap metal products to a private company without following proper tender procedures. The Committee therefore decided to examine the following specific matters during its hearing with the Group Chief Executive of Transnet, who appeared on behalf of the Transnet Board, on 26 September 2003.

2.1 The Auditor-General found that at the time of the contracts in question, the Transnet procurement rules and guidelines were aimed at facilitating open tender procedures in terms of which the best tenderer should be appointed to the advantage of Transnet. The rules envisage active participation by the Transnet Tender Board in the adjudication process - at least in an advisory capacity - before contracts are awarded. The use of Rule 21(2) which caters for contracts not exceeding R300 000 allows for deviation from the general rules by allowing for the confinement of a tender to one tenderer only under special circumstances. The scrap metal contract of 1996 was not such a case.

2.2 The Committee was concerned inter alia that –

In the past, the Executive Committee of the Board (EXCO) had reportedly often made use of a procurement rule [Rule 21(2)] to avoid open tender procedures to bypass the Transnet tender board;

In the case of this particular contract, Transnet had lost at least R8,5 million or more by abandoning the open tender process,

Transnet had sold the scrap metal at prices below market-value, which has resulted in further losses;

Losses were incurred owing to incorrect prices being charged for particular categories of scrap metal all of which were below market value;

Price adjustments had not always been effected and incorrect exchange rate calculations also resulted in losses to Transnet; and

Various instances of weighbridge certificates were amended without verification and the necessary authority or acceptable explanations, to the detriment of Transnet.

The Committee is of the view that Transnet had not provided convincing reasons to justify the selling scrap metals without following an open tender process. The Committee is also concerned that internal Transnet investigations have not yet been completed.

However, the Committee welcomes the Group Chief Executive’s frank approach to the matters reported. The Committee welcomes his confirmation that –

Transnet remains committed to ensuring that necessary action will be taken where there is evidence of misconduct;

Transnet Internal Audit unit was conducting an investigation regarding the weighbridge certificates inaccuracies and discrepancies, as well as the credit notes passed in favour of the company in question, and that the Committee will be informed on the outcome of the findings of the Internal Audit investigation;

Depending on the outcome of the Internal Audit investigation, the findings would also be referred to the Scorpions for further investigation;

Disciplinary and criminal action would be pursued should any evidence of misconduct or criminality be found; and

The possibility of recovering losses from the company in question will be actively pursued, and that every precaution will be taken from Transnet’s side to guard against prescription of any such claim from the company.

The Committee therefore recommends that assurance be provided to Parliament that –

the Board has implemented processes within Transnet that will prevent misuse specifically of Rule 21(2);

contracting for all goods and services take place in accordance with a system which is fair, equitable, transparent, competitive and cost effective.

The Committee further recommends that a report be furnished to the Committee on all the pending issues referred to in par 3 above by no later than the end of May 2004.

The Committee is also concerned that Transnet took so long before launching its own internal investigation about the matter since many questions were raised, about the awarding of the contract, in the public domain over many years.

Report to be considered.

Expenditure totaling R23 970 000 incurred during the 1997/98 to 1999/00 financial years was regarded as unauthorised in terms of section 33 of the Exchequer Act, 1975 (Act No. 66 of 1975).

The Committee considered evidence of the following incidents of unauthorised expenditure that arose owing to procedural contravention of Treasury Instructions and State Tender Board procedures for which ex post facto approval had not been granted:

1. During the 1997-98 financial year an amount of R3 818 737 represented unauthorised expenditure. This amount consisted of:

1. Appointment of a variety of service providers without following State Tender Board procedures – R1 024 035.00.
2. Payment to a service provider in contradiction of the agreed hourly rated – R10 993
3. Awarding of a contract for the outsourcing of government motor transport without the approval from the State Tender Board – R1 822 024
4. A transfer payment made without tender procedures being followed and no prior State Tender Board was requested – R 190 000
5. A single quotation was obtained instead of the required number –R14 690
6. Purchasing of a computer network, hardware and software without following tender procedures –R 684 983.
7. Appointment of specialist consultants without inviting tenders – R 72 012

1. During the 1998-99 financial year an amount of R 7 374 935.68 represented unauthorised expenditure. This amount consisted of:

1. Awarding of a contract for the outsourcing of government motor transport without the approval of State Tender Board- R 1 414 254 ( see also par.

(c )above)

2. Appointment of a variety of consultants for taxi driver training and the use of the SAPS Dog School facility for accommodation without following State Tender Board procedures (see also par (a) above – R 413 379.90
3. Appointment of a service provider for the search and rescue services. Ex post facto approval was not granted – R 236 746.35
4. Appointment of consultant for drafting outsourcing agreement without following tender procedures –R 19 990
5. Payments made to suppliers for the publication of brochures, venues and refreshments for plenary meetings with transport stakeholders without following the procurement procedures –R 264 952
6. Contract extended without tender board approval – R 87 004.80
7. Directorate approved the substitution of staff without following the tender procedures – R139 288.80
8. Appointment of personnel without the approval of the State Tender Board – R 229 836.00.
9. Consultants appointed before letter of acceptance was issued. State Tender Board approval was not received at this stage - R 700 422
10. Appointment of contractors without the approval from the State Tender Board –R212 895
11. Payment of accommodation for taxi delegates without following tender procedures – R22 459.25
12. Appointment of service provider to produce publication without following tender procedures – R 17 035.30
13. Approval of the claim as costs incurred during meetings of the Executive and Management Committees without following tender procedures – R 11 657.35
14. Expenditure incurred for promotion and advertising agreement – R 5 066.45
15. Payments made to consultants to ensure continued progress with National Taxi Task Team. Ex post facto approval could not be granted – R 3 549 085.88
16. Appointment of audit firm to conduct forensic audit without following tender procedures – R50 862.60

1. During the 1999/00 financial year an amount of R12 775 993.34 represented unauthorised expenditure. This amount consisted of:

1. New agreement (contract) intended to replace the existing agreement without State Tender Board approval R11 965 766.34
2. Appointment of consultant to conduct an investigation of bus accident involving a number of tourists. Procurement procedures were not followed and STB denied the ex post facto approval – R 810 227.00.

The Committee notes that unauthorised expenditure was for services satisfactory provided, that no individual benefited unduly from this expenditure, that explanations were forthcoming and that control measures have been implemented to improve financial discipline.

However, the frequency with which relatively small amounts of unauthorised expenditure are countenanced (there were 25 such incidents in the period under review) suggests to the Committee some disquieting trends.

The first is the evidently cavalier manner the Department has to the requirement of the PFMA, which suggests the existence of a departmental culture that anticipates automatic approval by Parliament for unauthorised expenditure when the amounts are small and an explanation is provided ‘that the state received value for money’.

The second is that it appears that the Department lacks focus and, that in consequence, its commitment to good financial governance is deficient.

In the light of the above SCOPA recommends that Parliament approves the R23 970 000 of unauthorised expenditure relating to 1997/98 to 1999/00 financial years but that the approval be accompanied by a warning that future amounts of unauthorized expenditure will be subject to particular scrutiny and approval may be selectively withheld.

Report to be considered

Expenditure totaling R 3 201 000 incurred during the 1997/98 to 1999/00 financial years was regarded as unauthorised in terms of section 33 of the Exchequer Act, 1975 (Act No. 66 of 1975).

The Committee considered evidence of the following incidents of unauthorised expenditure that arose owing to procedural contravention of Treasury Instructions and State Tender Board procedures.

During the 1997/98 financial year an amount of R202 000 represented unauthorised expenditure. This was due to a bank account opened for the Second National Conference on Small Business without the approval of the National Treasury. The bank account was opened to control the funds of the conference and the audit was conducted verifying the figures.

During the 1998/99 financial year, an amount of R 1 703 000 represented unauthorised expenditure. This amount consisted of:

Payment for consultancy services in respect of National Lotteries Board structure without following State Tender Board procedures – R 108 970

SCOPA, in its twelfth report 2000, requested the Accounting Officer to confirm the exact amount in question and whether value had been received for services provided by the firm in question. The Department, in its replies informed the Committee that value for money was received.

Payment made in respect of freight charges, and exchange rate fluctuations. The tender amount were exceeded R1 477 000.00.

Payment made for research done on clothing industry. The tender amount exceeded- R 117 000.00.

During the 1999/00 financial year, an amount of R 1 269 000 represented unauthorised expenditure. This amount was incurred as a result of procurement procedures not being followed, two cases where tender price exceeded tender prices and three cases where tender procedures were not followed.

The committee is concerned that the culture may exist at the Department on the basis that because of services were received by the State for money spent, Parliament would automatically grant approval. However this does not detract from the fact that contravention of the relevant procedures and Treasury Regulations had taken place.

In written evidence on the above–mentioned instances of unauthorised expenditure, the Accounting Officer confirmed that:

Services for the expenditure were received to the satisfaction of the department;

No individual benefited unduly from such expenditure and;

Control measures are now in place to prevent this from recurring.

In the light of the above, the Committee recommends that Parliament approves the amount of R3 201 000 relating to the 1997/98 to 1999/00 financial years.

Report to be considered

The Committee notes that unauthorized expenditure totaling R9 000,00 was incurred during the 2000/01 financial year as follows:

R9 000,00 incurred for improper and unlawful promotion of one official.

In written evidence, the Department informed the Committee that it was awaiting approval/condonement of the employee’s position from Department of Public Service and Administration.

In light of the above, the Committee recommends that Parliament awaits the outcome of the abovementioned process before considering approval.

Report to be considered

The Committee notes that unauthorized expenditure totaling R617 788,00 was incurred during the 1996/97 financial year, R1 838 577,00 incurred during the 1997/98 financial year, R82 000,00 incurred during the 1998/99 financial year, R6 000,00 incurred during the 1999/00 financial year and R12 345 000,00 incurred during the 2001/02 financial year and reports as follows:

1996/97 financial year

R617 788,00 paid in respect of the Water Conservation Programme as an emergency without prior State Tender Board Approval.

1997/98 financial year

R1 838 577,00 was incurred due to procurement procedures not followed at the time of appointing consultants to review the Water Law.

1998/99 financial year

R82 000,00 was incurred due to tender procedures not followed.

1999/00 financial year

R6 000,00 was incurred due to tender procedures not followed.

2001/02 financial year

R12 345 000,00 was incurred due to overspending on vote, as a result of the restructuring of the Forestry function that was not forseen.

In written evidence on the above-mentioned instances of unauthorized expenditure, the Accounting Officer confirmed that:

Services for the expenditure were received to the satisfaction of the department;

No individual benefited unduly from such expenditure and;

Control measures are in place to prevent this from reoccurring.

In light of the above, the Committee recommends that Parliament approves the amount of R617 788,00 relating to the 1996/97 financial year, R1 838 577,00 relating to the 1997/98 financial year, R82 000,00 relating to the 1998/99 financial year, R6 000,00 relating to the 1999/00 financial year and R12 345 000,00 relating to the 2001/02 financial year.

Notwithstanding the above recommendation, the Committee finds the continuous lack of adherence to State Tender Board directives and sound financial planning unacceptable. The Committee notes the measures implemented to ensure that Unauthorized Expenditure of this nature does not reoccur, however, it will hold the Accounting Officer accountable in future.

In addition, the Committee wishes to point out that Parliament has ensured that the Public Finance Management Act (PFMA) contains provisions aimed at strict budgetary discipline. All future instances of unauthorized expenditure will therefore be thoroughly scrutinized in terms of sections 34, 38 and 81 of the PFMA.

Report to be considered

The Committee notes that unauthorized expenditure totaling R10 598 000 was incurred during the 2000/01 financial year and reports as follows:

R6 130 000 unapproved transportation of deportees by air without the approval of the State Tender Board to deviate from State Tender Board Regulations.

R4 468 000 overspending on programme 1.

In written evidence on the above-mentioned instances of unauthorized expenditure, the Accounting Officer confirmed that:

Services for the expenditure were received to the satisfaction of the department;

No individual benefited unduly from such expenditure and;

Control measures are in place to prevent this from reoccurring.

In light of the above, the Committee recommends that Parliament approves the amount of R10 598 000 relating to the 2000/01 financial year.

Notwithstanding the above recommendation, the Committee views the lack of adherence to State Tender Board directives with concern. The Committee however, commends the department on the measures implemented to ensure that this does not reoccur, and will monitor the department’s progress in this regard.

In addition, the Committee wishes to point out that Parliament has ensured that the Public Finance Management Act (PFMA) contains provisions aimed at strict budgetary discipline. All future instances of unauthorized expenditure will therefore be thoroughly scrutinized in terms of sections 34, 38 and 81 of the PFMA.

Report to be considered

The Committee notes that unauthorized expenditure totaling R46 041 797,48 was incurred during the 1999/00 financial year and reports as follows:

R43 520 729,19 excess on voted funds for Personnel expenditure.

R2 293 801,33 non-compliance with State Tender Board directives with the appointment of consultants for investigations.

R117 410,46 donor funds accounted for against vote.

R109 856,50 non-compliance with State Tender Board directives on the purchase of furniture for the State Attorney’s office.

In written evidence on the above-mentioned instances of unauthorized expenditure, the Accounting Officer confirmed that:

Services for the expenditure were received to the satisfaction of the department;

No individual benefited unduly from such expenditure and;

Control measures are in place to prevent this from reoccurring.

In light of the above, the Committee recommends that Parliament approves the amount of R48 041 797,48 relating to the 1999/00 financial year.

Notwithstanding the above recommendation, the Committee views the lack of adherence to State Tender Board directives with concern. The Committee however, commends the department on the measures implemented to ensure that this does not reoccur, and will monitor the department’s progress in this regard.

In addition, the Committee wishes to point out that Parliament has ensured that the Public Finance Management Act (PFMA) contains provisions aimed at strict budgetary discipline. All future instances of unauthorized expenditure will therefore be thoroughly scrutinized in terms of sections 34, 38 and 81 of the PFMA.

Report to be considered

The Committee notes that unauthorized expenditure totaling R523 000,00 had been incurred during the 2000/01 financial year as follows:

R392 000,00 incurred for non-compliance with State Tender Board directives for the launch of the Directorate of Special Operations service provider being David Barret & Co.

R131 000,00 approved by Department of Justice control committee for the above launch but not submitted to the State Tender Board.

In written evidence on the above-mentioned instances of unauthorized expenditure, the Accounting Officer confirmed that:

Services for the expenditure were received to the satisfaction of the department;

No individual benefited unduly from such expenditure and;

Control measures are in place to prevent this from reoccurring.

In light of the above, the Committee recommends that Parliament approves the amount of R523 000,00 relating to the 2000/01 financial year.

Notwithstanding the above recommendation, the Committee views the lack of adherence to State Tender Board directives with concern. The Committee however, commends the department on the measures implemented to ensure that this does not reoccur, and will monitor the department’s progress in this regard.

Report to be considered

The Committee notes that unauthorized expenditure totaling R631 760,11 was incurred during the 1996/97 financial year and R1 428 163,05 incurred during 1999/00 financial year and reports as follows:

1996/97 financial year

R631 760,11 remuneration paid to consultants for services delivered during the Government Communications Task Group. State Tender Board prescripts were not followed.

1999/00 financial year

R5 390,72 incurred where the approved amount by the Department Tender Committee for a media breakfast hosted by the President were exceeded.

R22 152,00 incurred with the delivery of decoration medals without Departmental Tender Approval.

R1 400 620,33 National Youth Commission

In written evidence on the above-mentioned instances of unauthorized expenditure, the Accounting Officer confirmed that:

Services for the expenditure were received to the satisfaction of the department;

No individual benefited unduly from such expenditure and;

Control measures are in place to prevent this from reoccurring.

In light of the above, the Committee recommends that Parliament approve the amount of R631 760,11 relating to the 1996/97 financial year and the R1 428 163,05 relating to the 1999/00 financial year.

The committee further notes the separation of the financial statements for the National Youth Commission from that of the Presidency and will in future follow this up separately.

Report to be considered

The Committee notes that unauthorized expenditure totaling R160 000 was incurred during the 1993/94 financial year and reports as follows:

R160 000 savings on Capital Expenditure was used for over expenditure on other programmes of department without the necessary approval.

In written evidence on the above-mentioned instances of unauthorized expenditure, the Accounting Officer confirmed that:

Services for the expenditure were received to the satisfaction of the department;

No individual benefited unduly from such expenditure and;

Control measures are in place to prevent this from occurring.

In light of the above, the Committee recommends that Parliament approves the amount of R160 000 relating to the 1993/94 financial year.

Report to be considered

The Committee notes that unauthorized expenditure totaling R539 956,00 was incurred during the 1997/98 financial year and reports as follows:

R275 000,00 paid by the Department of Social Development to various companies for conference/workshop facilities and production services relating to commitments flowing from the Beijing Platform of Action.

R142 000,00 paid to a forensic auditor to audit the SOCPEN database in the Eastern Cape.

R122 956,00 paid for advertisement cost related to the draft White Paper on Population Policy.

In written evidence on the above-mentioned instances of unauthorized expenditure, the Accounting Officer confirmed that:

Services for the expenditure were received to the satisfaction of the department;

No individual benefited unduly from such expenditure and;

Control measures are in place to prevent this from reoccurring.

In light of the above, the Committee recommends that Parliament approves the amount of R539 956,00 relating to the 1997/1998 financial year.

Notwithstanding the above recommendation, the Committee views the lack of adherence to State Tender Board directives with concern. The Committee, however, commends the department on the measures implemented to ensure that this does not reoccur, and will monitor the department’s progress in this regard.

Report to be considered

The Committee notes that unauthorized expenditure totaling R822 460,68 was incurred during the 1999/00 financial year and a total of R10 288,69 was incurred during the 2000/01 financial year and reports as follows:

1999/00 financial year

R800 000,00 being a transfer payment to the South African National Recreation Council in deviation from Treasury Regulations and was not condoned by Treasury.

R22 460,68 being expenditure incurred on the reappointment of two officials who opted for voluntary severance packages that was in contravention of public service regulations.

2000/01 financial year

R10 288,69 incurred for temporary employment that was not approved.

In written evidence on the above-mentioned instances of unauthorized expenditure, the Accounting Officer confirmed that:

Services for the expenditure were received to the satisfaction of the department;

No individual benefited unduly from such expenditure and;

Control measures are in place to prevent this from reoccurring.

In light of the above, the Committee recommends that Parliament approves the amount of R822 460,68 relating to the 1999/00 financial year and the amount of R10 288,69 relating to the 2000/01 financial year.

The Committee further commends the department on the new controls in place to prevent further Unauthorized Expenditure of this nature. However, the Committee is concerned about the time consuming manner in which replies to requests and approval thereof occur and regards this as an issue the department must rectify.

Report to be considered

The Standing Committee on Public Accounts, having considered the Audit Report on the Annual Financial Statements of the SA Post Office Limited for 2001-2002, reports as follows:

In a legal opinion of the Parliamentary Law Advisers, it was confirmed that SCOPA’s mandate, relating to accountability and oversight, included the financial statements and the auditors’ report thereon, of any organ of state as provided for in section 239 of the Constitution. This includes public entities listed in the Public Finance Management Act (PFMA), whether or not they are audited by the Auditor-General.

During its earlier review of the Report of the Auditor-General on audit outcomes for 2001-2002 [RP 226/2002], the Committee had also taken note of the areas of concern highlighted by the Auditor-General in par 1.6 on page 28 of that Report. A matter of particular concern was that only six of the fifteen existing public entities had tabled their annual reports in Parliament within the prescribed period. The Committee once again reiterates that reporting to Parliament in time is essential for effective accountability and parliamentary oversight.

In order therefore to fulfil its function in terms of Rule 206, and in the time still available to the Committee during 2003, the Committee reviewed the reports on two of the fifteen existing major public entities listed in schedule 2 of the PFMA. This resulted in the Committee having a public hearing with the SA Post Office on 17 September 2003.

The Committee was concerned about a number of problem areas identified when it started to probe the financial affairs of the SA Post Office. The problems related to corporate governance, contractual obligations and internal control problems, as well as the doubt that was raised about the SA Post Office’s ability to continue as a going concern. The Committee was further concerned that the SA Post Office had received an unqualified audit opinion from the external auditors for the year under review despite the significance of some of these problems. The Committee was therefore also disappointed that the Annual Report did not contain a Report of the Audit Committee as required by Treasury Regulations 3.1.13 of the Public Finance Management Act ¹. The Audit Committee is expected to inter alia comment on the effectiveness of internal controls.

In his evidence before the Committee, the Chief Executive Officer – who is an executive member of the SA Post Office Board and appeared before the Committee on behalf of the Board – elucidated various corrective actions taken or still to be taken.

The Committee recommends that the Board persist with, and intensify where necessary, its corrective actions. It must specifically ensure that –

the control environment within the SA Post Office is placed on a sound footing as soon as possible;

in future, the Audit Committee report in terms of its obligations, and

the external auditors are requested to ensure that they bring to the attention of the shareowners, which include Parliament, any matter within the auditor’s examination, which in the auditor’s opinion, should in the public interest be brought to the notice of Parliament.

The Committee further recommends that a progress report on the salient improvements as well as problem areas still remaining be submitted to the Committee by 31 March 2004.

Report to be considered

The Committee notes that unauthorized expenditure totaling R195 040,87 was incurred during the 1998/99 financial year and R446 664,30 was also incurred during the 1999/00 financial year and reports as follows:

1998/99 financial year

The R104 684,66 relates to systems upgrading by Q Data Consulting of which the State Tender Board did not grant ex post facto approval.

R57 787,72 for Housing Support Initiatives.

R32 568,49 paid for advertising by Herdbuoys McCann-Erickson. State Tender Board Regulations were not adhered to.

1999/00 financial year

R446 664,30 for the National Housing Award banquet where the banquet and financial limits / prescripts were exceeded.

In written evidence on the above-mentioned instances of unauthorized expenditure, the Accounting Officer confirmed that:

Services for the expenditure was received to the satisfaction of the department;

No individual benefited unduly from such expenditure and;

Control measures are in place to prevent this from reoccurring.

In light of the above, the Committee recommends that Parliament approves the amount of R195 040,87 relating to the 1998/99 financial year and the amount of R446 664,30 relating to the 1999/00 financial year.

Notwithstanding the above recommendation, the Committee views the lack of adherence to State Tender Board directives with concern. The Committee however, commends the department on the measures implemented to ensure that this does not reoccur, and will monitor the department’s progress in this regard.

Report to be considered

In 1994 an authorised expenditure had occurred relating to R112 960, which relates to air travel and subsistence expenditure in respect of a visit to Ghana by former Deputy Minister of the Department of Arts, Culture, Science & Technology. This was in contravention of Section 4 2(c) of the Ministerial Handbook.

The action by the Deputy Minister appeared to be of material irregularity.

The former minister of Foreign Affairs therefore held that the money need not be recovered from the former deputy minister. Correspondence from the Department was also in the same vein, that the amount be written off as irrecoverable in terms of the Treasury Regulations (see SCOPA report no. 7)

The state attorney was of the view that no further action could be instituted against the former Deputy Minister due to prescription of the claim.

The Committee recommends that the amount be authorised by Parliament.

Report to be considered

Expenditure totaling R1 260 442.93 incurred during the 1997/98 to 1998/99 financial years was regarded as unauthorised in terms of section 33 of the Exchequer Act, 1975 (Act No. 66 of 1975).

The Committee considered evidence of the following incidents of unauthorised expenditure that arose owing to procedural contravention of Treasury Instructions and State Tender Board procedures:

1. During the 1997-98 financial year an amount of R821 919 represented unauthorised expenditure. This amount consisted of:

1. R612 014, paid to companies for conference facilities, catering services, training and accommodation for participants without adhering to State Tender Board directives;
2. R148 753, paid to consultants without adhering to State Tender Board directives;
3. R61 152 paid for printing activities and repairs, without adhering to State Tender Board directives.

1. During the 1997-98 financial year an amount of R438 919.93 represented unauthorised expenditure in respect of payment to auditors for training services, without adhering to State Tender Board directives.

SCOPA wishes to express its dissatisfaction at the non-compliance with the

relevant regulations.

In addition, the Committee found the disclosure regarding unauthorised expenditure in the notes to the financial statements confusing. The Committee had to therefore seek clarity from both the Department and Auditor general in trying to understand the information disclosed. In future, the notes must provide appropriate details for Parliament to be able to form an opinion on the respective instances of unauthorised expenditure.

However, in written evidence on the above–mentioned instances of unauthorised expenditure, the Accounting Officer confirmed that:

• services for the expenditure were received
• no individual benefited unduly from such expenditure and;

• control measures are in place to prevent this from reoccurring.

In the light of the above SCOPA recommends that Parliament approves the R1 260 442.93 of unauthorised expenditure relating to 1997/98 to 1998/99 financial years but that the approval be accompanied by a warning that future amounts of unauthorised expenditure will be subject to particular scrutiny and approval may be selectively withheld.

Report to be considered

Expenditure totaling R26 165 465 incurred during the 1997/98 to 99/00 financial years was regarded as unauthorised in terms of section 33 of the Exchequer Act, 1975 (Act No. 66 of 1975).

The Committee considered evidence on the following incidents that arose owing to procedural contravention of Treasury Instructions, State Tender Board (STB) and procurement procedures.

1. During the 1997-98 financial year an amount of R 350 000 represented unauthorised expenditure in respect of a payment made to auditors for advice given to Aventura for its restructuring. However, there was no written agreement between the Minister for Public Enterprises and the consultant.

2. During the 1998-99 financial year, an amount of R 7 152 000 represented unauthorised expenditure due to non-adherence to tender procedures and overspending on the contract amount relating to consultancy services regarding the restructuring of state owned entities.
3. During the 1999-00 financial year an amount of R 18 663 465, comprising the following amounts, represented unauthorised expenditure:

• R1 437 486 – being payment made to a consultant for an extended contract. Although the STB approved the extension, there was no amended contract with the consultant reflecting this extension.

• R10 928 245 – arising out of a request of the Inter-Ministerial Committee on restructuring, for the appointment of the incumbent consultants to be extended. However STB ratification was not obtained.

• R5 957 413 - for the period April 1999 to March 2000, consultants were appointed as advisors to government for the restructuring of SAFCOL. Although the Department and advisors signed an agreement for the appointment, the process followed was not in accordance with STB regulations.

• R262 321- the Department and a donor agency entered into a draft agreement whereby a legal advisor to be appointed for the restructuring of Alexkor and Denel was to be paid. However the agreement was never formalised, but the appointment was made and the Department had to carry the cost of the legal advisor.

• R78 000 – was paid to a consultant for a leadership development programme without having invited official tenders.

SCOPA wishes to express its dissatisfaction with the non-compliance of the relevant regulations.

However, in written evidence on the above–mentioned instances of unauthorised expenditure, the Accounting Officer confirmed that:

• Services for the expenditure were received to the satisfaction of the department;
• No individual benefited unduly from such expenditure and;
• Control measures are now in place to prevent reoccurrence of this nature.

In the light of the above, the Committee recommends that Parliament approve the unauthorised expenditure of R15 359 220 relating to the 1997/98 to 1999/00 financial years.

SCOPA further recommends that with respect to the 1999/00 financial year and the two instances of R78 000 and R10,728 245, the Director General ensure that:

1. Regulations relating to expenditure control and financial management are adhered to at all times and in all circumstances regardless of the size of the amount concerned.

2. Senior managers are trained in expenditure control and financial management and a management system with specific objectives be devised, implemented and communicated within the department and that SCOPA be appraised thereof.
3. A disciplinary enquiry be held to ascertain why junior officials were allowed, without their being aware of correct tender procedures, to commit the department to expenditures without the foreknowledge of their superiors, including the Director General.
4. The R78 000 for the appointment of consultants to run a training course, which was committed by junior officials without the knowledge of the Director General, should not be approved until the outcome of the disciplinary enquiry be reported on, and considered by, SCOPA.
5. Approval of R10 928 245 referred to above paid as a consulting fee be similarly not approved until general principles are agreed to and guidelines are devised against which the recommendations are to be assessed, and SCOPA receives reports on both the principles and guidelines so devised.

The Committee notes with dismay the broad range of matters on which the consultant was asked to make recommendations. They range from pension and medical aid funding, to Black Empowerment, protocol on corporate governance and other issues of an economical, financial, commercial and regulatory nature. The consultant was originally appointed to advise on competitive tendering. Its brief subsequently became all embracing.

This raises the question of both the competence and depth of skills within the department that has the task of assessing whether state enterprises are capable of being restructured to improve services and contain costs. These tasks call for value judgments and require both professional competence and a depth of practical experience.

Accordingly the Committee recommends that the head of department considers an audit of objectives and outcomes, and the availability of departmental skills to achieve these ends, be undertaken and that conditions laid down by the

STB be adhered to under all circumstances.

Report to be considered

The Committee notes the unauthorized expenditure totaling R290 908.99 incurred during the 1999/00 financial year and unauthorized expenditure totaling R723 873.11 incurred during the 2000/01 financial year, reports as follows:

1999/00 Financial year

R107 713.08 was incurred when the contract for the development and provision of a computer based assessment ins trument was extended without written approval. (Non-adherence to Departmental Tender Committee Regulations.)

R183 195.91 was incurred when the authorized amount of R50 000 was exceeded with the appointment of the board of inquiry: Pollsmoor Management Area, when the agreement with the service provider was extended.

2000/01 Financial year

R723 873.11 was incurred in respect of payments made for strategic planning sessions, for the period 1 June 1992 to 31 May 1995.

In written evidence on the above-mentioned instances of unauthorized expenditure, the Accounting Officer confirmed that:

Services for the expenditure were received to the satisfaction of the department;

No individual benefited unduly from such expenditure and;

Control measures are in place to prevent this from reoccurring.

In light of the above, the Committee recommends that Parliament approves the amount of R290 908.99 relating to the 1999/00 financial year and the amount of R723 873.11 relating to the 2000/01 financial year.

Notwithstanding the above recommendation, the Committee views the lack of adherence to State Tender Board directives with concern. The Committee however, commends the department on the measures implemented to ensure that this does not reoccur, and will monitor the department’s progress in this regard.

In addition, the Committee wishes to point out that Parliament has ensured that the Public Finance Management Act (PFMA) contains provisions aimed at strict budgetary discipline. All future instances of unauthorized expenditure will therefore be thoroughly scrutinized in terms of sections 34, 38 and 81 of the PFMA.

Report to be considered