DoD working at upping financial controls to cut corruption and fraud


Ongoing qualified audit reports for Minister Nosiviwe Mapisa-Nqakula’s Department of Defence (DoD) saw one of Parliament’s defence oversight committees hear what is being done to change Auditor General Tsakani Maluleke’s financial opinion of the South African military.

While not going into detail as regards monies and amounts lost to irregular and unauthorised expenditure, the 16-page presentation, delivered to the Portfolio Committee on Defence and Military Veterans today by Secretary for Defence Gladys Sonto Kudjoe, gives some insight into what those tasked with overseeing the DoD’s financial wellbeing are thinking.

This includes informing the Auditor General of the process the DoD finance division takes in confirming the accuracy and completeness of identifying and disclosing irregular expenditure. Monthly meetings with representatives of services and divisions (of the SA National Defence Force) confirm cases identified in specific environments. Additionally, monthly accountability meetings attended by service and division chiefs “confirm recording of irregularities”.

The DoD internal audit division will assist 73 SANDF procurement centres nationally to “ensure complete accounting and recording of irregular expenditure”.

Investigations to date on irregularities found by AG staff are complete and the presentation notes the DoD “agrees” with government’s financial watchdog that asset management and buildings lease contracts contain “material irregularities”. The DoD financial boffins found no irregularities in a jet fuel contract and disagree with the AG on findings of material irregularities as regards the supply of fuel to keep SA Air Force (SAAF) Gripen and Hawk jet fighters in the air.

The DoD accounting officer (Secretary for Defence Gladys Kudjoe) is “tasked”, the presentation notes, to review recommendations made and advise on “charging” those implicated.

As far as fraud, criminality and corruption instances are concerned military police work with the SANDF Inspector General’s directorate anti-corruption and anti-fraud (DACAF). Once investigated cases are passed to either Magistrates’ Courts, the Court for Commercial Crimes or a military court of justice for further legal action.

Updating the Portfolio Committee on Defence and Military Veterans (PCDMV) on the status of seven irregular expenditure and fruitless and wasteful expenditure cases, Kudjoe said two irregular expenditure investigations are finalised and recommendations are being implemented. Three cases are being investigated by military police with police case numbers were issued at Dequar Road (Pretoria) and Simon’s Town – cases are currently with the Commercial Crimes Court. There is one case of irregular expenditure with the SIU (Special Investigations Unit) and the service provider ordered to pay back R41 million plus interest.

Irregular, fruitless and wasteful expenditure

In March, the PCDMV heard the DoD was investigating seven cases of unauthorised, fruitless, wasteful and irregular expenditure amounting to R1.5 billion.

One case of irregular expenditure concerns a PriceWaterhouse Coopers contract for asset management worth R604 million. In June 2020 a forensic company was appointed to investigate.

The DoD Inspector General (IG) is looking into a R239 million Through Life Cycle Management contract from the 2015-2019 timeframe.

Investigations into R447 million worth of asset management contracts from 2017 to 2019 are finalised, ratified by the principals and due processes are being followed, the DoD said in March.

Information and communications technology (ICT) contracts worth R216.7 million for ICT services and licenses for 2018/19 were flagged as bids were not evaluated according to criteria stipulated in bid documentation. The service provider conceded overcharging the DoD by R41 million and entered into an agreement with the SIU to pay back the R41 million with an acknowledgement of debt issued.

Progress was reported in March on an investigation into R105 million worth of non-compliant spending in 2018/19.

The DoD was also investigating an incorrect evaluation for spare parts and storage for ships in Cape Town between 2018 and 2020. Irregular spending in this case amounts to R59 million.

The final case of irregular expenditure concerns under-utilisation of the Eco Park, Centurion, property over four years (between 2015 and 2019, amounting to R108 million).

For the 2019/20 financial year, irregular expenditure totalling R2.836 billion was recorded due to non-compliance with supply chain management processes and underfunding the compensation of employees (CoE) allocation.

Of the R2.836 billion in irregular expenditure incurred for 2019/20, R2.609 billion was for expenditure in excess of the CoE allocation. This was due to a reduction imposed by National Treasury on actual employees in service of the DoD, the department’s annual report said.

The difference of R230 million incurred is due to contracts awarded through unfair bidding processes from previous years.