Ad Hoc Committee on the Commission for Gender Equality (CGE) Forensic Investigation presentation

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Ad Hoc Committee on the Commission for Gender
Equality (CGE) Forensic Investigation
presentation

• National Treasury

Presenter Gillian Wilson Public Finance
31 January 2011
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LEGISLATIVE FRAMEWORK

• Institutions supporting constitutional democracy
  are independent and subject only to the
  Constitution and the law (section 181(2) of the
  Constitution.
• No persons or organ of the state may interfere
  with the functioning of Chapter 9 institutions
  (section 181 (4) of the Constitution and section
  10(2) of the CGE Act.
• Chapter 9 institutions are accountable to the
  National Assembly and must report on their
  activities and the performance of their functions
  to the Assembly.
• Before transferring any funds to an entity within
  or outside government , the accounting officer
  must obtain a written assurance from the entity
  that implements effective, efficient and
  transparent financial management and internal
  control systems, or, if such written assurance is
  not given render the transfer of the funds
  subjects to conditions and remedial measures. BUT
  this does not apply to constitutional
  institutions (section 38 (j) of the PFMA).

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Accountability structure of the CGE

• Section 119 of the constitution provides for the
  establishment of the commission for gender
  equality.
• And determines the members of the commission and
  the requirements for their appointment
• The Act stipulates that the Commission shall
  consist of a chairperson and no fewer than 7 and
  no more than 11 members
• The Commission shall in consultation with the
  Minister of Finance appoint a suitable qualified
  person as Chief Executive Officer to assist the
  commission with the financial administrative and
  clerical functions
• The persons appointed by the commission shall
  receive remuneration, allowances and other
  employment benefits and shall be appointed on
  terms and conditions and period as determined by
  the commission in consultation with the Minister
  of Finance
• The CEO shall be responsible for the management
  and administrative control over staff and shall
  be accountable to the Commission
• The CEO shall be charged with the responsibility
  of accounting for money received and paid by the
  Commission and also accounting records
• Performed functions assigned by the Commission in
  order to achieve the objects of the Commission
  shall for those purposes be accountable to the
  Commission.

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Internal Control Environment of the CGE

• The PFMA is clear that there should be a
  distinction between the accounting officer and
  the body that the accounting officer is
  accountable to, and that the accounting officer
  or acting accounting officer should be an
  Officer. National Treasury may approve that a
  person other than the CEO to be appointed as the
  accounting officer.
• This principle was violated when the Office of
  the Chairperson was subsumed into the office of
  the CEO this appointment blurred the lines
  between the accounting officer responsible for
  sound financial management and the Commission
  (the executive) that the accounting officer is
  accountable to.
• The PFMA does not provide for a member of the
  executive or two persons to be appointed as
  Accounting Officer.
• The internal control environment of the
  Commission is not good for achieving the
  objectives of the Commission The report of the
  AG describe the control environment as high risk
  and susceptible to fraud.
• There is no clear procedures that guide the
  relationship and interaction between the
  Commission and the administration of the CGE. The
  AG report also cited the lack of leadership and
  the failure of the executive to take appropriate
  action on previous reports.

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Financial misconduct by public officials
Treasurys role

• Chapter 10 of the PFMA (and Treasury Regulation
  4) provide for the procedures to be followed in
  addressing allegations of financial misconduct
  and maladministration by officials, including the
  Accounting Officer (AO).
• The PFMA clearly sets out
• a). what constitutes financial misconduct
• b). disciplinary and criminal
  proceedings to be followed amid allegations of
  financial misconduct against officials
• Section 84 of the PFMA provides for the
  applicable legal regime for disciplinary
  proceedings as follows
• a charge of financial misconduct against an
  accounting officer or official referred to in sec
  81 or 83 or an accounting authority or a member
  of an accounting authority or an official
  referred to in sec 82, must be investigated,
  heard and disposed of in terms of the statutory
  or other conditions of appointment or employment
  applicable to that accounting officer or
  authority, or member or official, and any
  regulations prescribed by the Minister in terms
  of sec 85.

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Financial misconduct by public officials
Treasurys role (continued)

• The Minister of Finance sets regulations
  prescribing procedures to be followed in the
  event of financial misconduct by an official
  (sec 85)
• These regulations prescribe, among other things
• 1) the manner, form and circumstances for
  reporting such allegations to the National
  Treasury and the auditor General
• 2) matters relating to the investigation of
  allegations of financial misconduct
• 3) circumstances in which the National Treasury
  or Provincial Treasury may direct that
  disciplinary steps be taken or criminal charges
  be laid against a person for financial
  misconduct
• 4) the circumstances in which the findings of
  the disciplinary board and any sanctions imposed
  by the board must be reported to National
  Treasury and the Auditor General.

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Investigation of alleged financial misconduct
TR - 4, sec 85(1)(b), (c) and (d) of the PFMA

• The AO must, within 30 days from the date of
  discovery of an alleged financial misconduct,
  ensure that an investigation is conducted into
  the matter and if confirmed, ensure that a
  disciplinary hearing is held in accordance with
  applicable prescripts and agreements in the
  public service.
• If the allegations are against the AO, the
  relevant treasury, as soon as it becomes aware of
  the alleged misconduct, must ensure that the
  relevant executive authority initiates an
  investigation into the matter and if the
  allegations are confirmed, holds a disciplinary
  hearing in accordance with applicable prescripts
  and agreements in the public service.
• A relevant treasury may
• (a) direct that an official other than an
  employee of the institution conducts the
  investigation or
• (b) issue any reasonable requirement regarding
  the way in which the
  investigation should be performed.

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Role of the National Treasury Maladministration
and misuse of funds

• Section 38(1)(c)(ii) of the PFMA
• Accounting Officer must take effective and
  appropriate steps prevent unauthorized, irregular
  and fruitless and wasteful expenditure and losses
  resulting from criminal conduct
• If irregular expenditure is incurred,
  institutions needs to obtain the necessary
  authorization to regularize the expenditure
• Process to be followed - Practice note 4 of
  2008/09
• Irregular expenditure Register
• Determine if expenditure is irregular
• Indicate in AFS
• Submit request to the National Treasury for
  condonation
• If not condoned recover from relevant officials
  or apply debt write off policy

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Actions of National Treasury on the findings in
the report of the Public Protector

• The appointment of two members of the executive
  as CEO appear to be in contravention of the PFMA
  and the Act guiding the Commission and is
  therefore unlawful and irregular. Therefore the
  expenditure that occurred in this period was made
  in contravention with The Act and might
  constitute irregular expenditure and should be
  investigated.
• Action This finding relates to a legal provision
  and we referred this to our legal section for a
  legal opinion. Irrespective of the legal opinion
  we are not sure if this can reasonable be
  recovered, but we urge the Commission to put
  proper procedures in place to avoid this from
  reoccurring.
• Based on the findings of the public protector and
  AG this expenditure should be reported to
  National Treasury as irregular expenditure.
• Submit a request to NT to regularize the
  expenditure
• R4 million was spent on a Organizational
  Diagnostic Process with no tangible result that
  can be of any value to the organization. This
  appear to expenditure that was made in vain and
  that could have been avoided had reasonable care
  been exercised and constitutes fruitless and
  wasteful expenditure. Authorizing such
  expenditure by the accounting officer should be
  investigated.
• Action We would like the CGE provide NT with
  documents to show the value derived from this
  work. Based on this, if no satisfactory value was
  added, we would want to recommend that the
  Commission take the necessary steps to recover
  this money.
• based on the findings of the public protector and
  AG this expenditure should be reported to
  National Treasury as irregular expenditure.
• Submit a request to NT to regularize the
  expenditure

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Actions of National Treasury on the findings in
the report of the Public Protector

• The appointment of a consultant, Mr. Setshedi as
  CEO and accounting officer appear not to be in
  line with the PFMA as Mr. Setshedi was at the
  time not an employee or official of the
  Commission. This appointment appear to be
  unlawful and irregular, it also constitute
  maladministration and improper conduct. The
  expenditure that occurred during this period
  might therefore resulted in irregular
  expenditure and had to be investigated.
• Action This finding relates to a legal provision
  and we referred this to our legal section for a
  legal opinion. Irrespective of the legal opinion
  we are not sure if this can reasonable be
  recovered, but we urge the Commission to put
  proper procedures in place to avoid this from
  reoccurring.
• based on the findings of the public protector and
  AG this expenditure should be reported to
  National Treasury as irregular expenditure.
• Submit a request to NT to regularize the
  expenditure
• On the report of the AG is important that the
  plenary compile and implement a proper corrective
  plan to address the irregularities identified,
  strengthening internal control measures in the
  Commission and to develop and to implement
  policies in key areas to ensure compliance to
  legislation and the effectiveness of the
  Commission. Instances of irregular expenditure
  was identified.
• Action The office of the accountant General will
  assist with monitoring of the implementation of
  this corrective plan and report to management of
  the commission on a regular basis. Irregular
  expenditure should be reported to National
  Treasury

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Interventions of the National Treasury to date
/ why is the money still voted

• Briefing both the then Ministers of Finance and
  Justice and Constitutional Development on CGEs
  financial management matters in 2008 after the
  MTEC hearing in September 2008.
• Briefing led to a meeting held on the 3rd
  November 2008 between DoJ CD, NT and CGE.
• In that meeting NT advised CGE to prioritise the
  filling of critical posts, e.g. CFO and CEO and
  that internal stability needs to be created.
• As a result the then Minister of DoJ CD
  seconded the Chief Director Budgets to the CGE.
  He assumed duty on 12th January 2009.
• In January 2009, the Deputy Speaker of Parliament
  was assured by the Chairperson that indeed the
  CGE has turned the corner and is capable of
  discharging its constitutional mandate
• NT recommended to both MTEC and MinComBud that no
  additional discretionary allocation should be
  made to CGE until the implementation of a
  turnaround strategy.
• The turnaround strategy was implemented from May
  2010 and the CGE promised monthly report on the
  implementation of the turnaround strategy

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Recommendations for remedial action in the Public
Protector report

• Moved from disclaimer in 2008/09 to qualification
  in 2009/10
• Most management positions are vacant
• CEO filled 1 August 2010
• CFO interviews to be held 1st week February 2011
• Most findings due to a lack of internal controls
  and a weak control environment.
• Limited personnel, limited segregation of duties
• None of these findings are difficult to correct
  if managerial positions are filled with
  appropriately qualified people
• CEO has to set up timelines with CFO to resolve
  these findings
• CEO has to put in place Internal Audit Section
  and Audit Committee

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• END
• THANK YOU