Two weeks after her Department of Defence (DoD) was hauled over the coals by its internal audit committee, Minister Thandi Modise’s portfolio was given more of the same by Auditor General Tsakani Maluleke.
The audit committee found total irregular expenditure standing at R15.98 billion, arising from the compensation of employees bill reaching a total of R10.1 billion and R4.9 billion coming from within the procurement environment and logistics division. Fruitless and wasteful expenditure amounts to R438.7 million.
As with the previous roasting, the Portfolio Committee on Defence and Military Veterans (PCDMV) again heard how poorly the DoD, including the Department of Military Veterans (DMV), performed in its duty to “serve the public good”.
A list of material irregularities was presented to Cyril Xaba’s PCDMV on 27 March, with progress reported on some. “Likely financial loss” was pointed out by the Auditor General as the probable outcome of many, including lease payments for unoccupied buildings, an incorrectly awarded inventory and asset management contract and what is termed an “unfair award for fuel supply”.
The list mentions by name 1 and 2 Military Hospitals (non-usage of medical equipment) and the Department of Military Veterans where “allocation and payment of emergency housing to ineligible military veterans” will or has resulted in financial loss.
As far as actions taken on these matters are concerned, Maluleke’s office notes, among others, “no response received on actions taken to address recommendations”; awaiting “detailed feedback” from Acting Secretary for Defence (SecDef), Thobekile Gamede; investigation still in progress; and referred to the Special Investigating Unit (SIU).
With regard to the DoD making progress based on the Status of Records Review (SoRR), the AG found that the DoD did not finalise the review of audit action plans in time to address findings raised during the 2022-23 audit cycle; the internal audit division was not sufficiently resourced; the department did not establish adequate and sufficient internal controls relating to tangible capital assets; and none of the five qualification areas were resolved or were in the process of being addressed.
Furthermore, progress to address the completeness of the irregular expenditure qualification was limited. Progress to address procurement related internal control deficiencies was “of concern”. The AG’s review “noted limited movement in investigations of irregularities (irregular and fruitless and wasteful expenditure, financial misconduct and material irregularities).” The investigation delays “have a negative impact on implementing consequence management.”
As border safeguarding equipment has not yet been procured in spite of budget being made available, the delay may “affect the department’s efforts to effectively protect the borderlines.”
The impact of these concerns is that material misstatements are likely to recur; there will be an increase in irregular, fruitless and wasteful expenditure; no consequences for transgressors will have an impact on enforcing accountability; and as losses to the state are not promptly and effectively recovered, resources are not being used effectively and economically. Furthermore, procurement delays have a negative impact on the availability of much needed defence capabilities.
Maluleke’s presentation makes special mention of what is termed a “legal conundrum”. This arises because SecDef “does not have the power to exercise disciplinary functions over members, while the chief of the SANDF [SA National Defence Force] has the power to take steps, including disciplinary steps, against members and certain employees”. This effectively means Gamede “cannot lawfully take disciplinary steps against members under the purview of the chief of the SANDF”. Additionally she cannot lawfully instruct the Chief, General Rudzani Maphwanya “to take those steps”. This, the presentation has it, is due to the structure and distribution of power in the Defence Act and the DoD’s internal accountability arrangements.
“Remedial action and certificates of debt can only be issued to a defaulting accounting officer and do not extend to any other official or officer, in this case, the chief of the SANDF,” according to the presentation.
The presentation has five “key messages” for Minister Modise to accelerate accountability improvements to “serve the public good”.
On the DoD, the internal control environment must be strengthened to achieve accurate and transparent reporting. Senior management posts must be filled. Leadership must collaborate to implement consequence management and protect departmental resources. Additionally, the DoD accountability framework, including the departmental delegations by SecDef, must be revised. The supply chain management function must move to “the purview and control of the Chief Financial Officer (CFO), as required by National Treasury Regulations in terms of the PFMA (Public Finance Management Act)”.
For the DMV specifically, instability at leadership level “should be addressed”, the internal audit unit “must be capacitated” and consequence management “must be implemented”.
At the DoD, the AG wants to see a stronger internal control environment in the best interests of accurate and fair reporting as well as a revision of the “accountability framework” and a repositioning of supply chain management under the “purview” of the Chief Financial Officer (CFO).
In a telling conclusion, the AG has it there should be a “culture shift” at and in the DoD with the emphasis on performance, accountability, transparency and integrity. Additionally, ethical leadership should be enforced with those in charge and command performing effectively and taking accountability for their specific areas of responsibility.
