Deviations and Expansions: Office of Chief Procurement Officer briefing

Meeting report

Deviation/Expansion requests in Quarter 1: Office of Chief Procurement Officer (OCPO) update
Mr Willie Mathebula, Acting Chief Procurement Officer: OCPO National Treasury, thanked the Committee for inviting the Office to report on deviations and expansions for the First Quarter of the 2018/19 financial year. He handed over to Mr Tshitangano to present the report to the Committee.

Mr Solly Tshitangano, Chief Director: Chief Director Of Supply Chain Governance, OCPO, National Treasury, said the presentation outline will focus on the introduction, deviation and expansion trend, deviations supported/not supported, expansions supported/not supported, and where is the fault line.

The Public Finance Management Act (PFMA) aims to secure transparency, accountability, and sound management of the revenue, expenditure, assets and liabilities of the state institutions. National Treasury must enforce the PFMA and any prescribed norms and standards, in national departments; provincial departments, in public entities and in constitutional institutions.

Deviation and Expansion trends based on number of applications per entity were provided as well as deviations supported/not supported and expansions supported/not supported (see document).

On where the fault lines are:
– Deviations below competitive bids are not reported (no obligation to report) by institutions. Abuse is picked by Auditor General during audits.
– Some Accounting Officers and Authorities deviate and participate in contracts arranged by other institutions. There is no obligation to report these deviations (Regulation 32 for municipalities and Regulation 16A6.6 for other institutions).
– Some Accounting Officers and Authorities use emergency provision to enter into long term contracts
– Some Accounting Officers and Authorities think the role of Treasury is to approve the supplier appointment whereas its role is to allow an institution not to advertise a bid but invite as many suppliers as possible and assess the quotations through bid committees.
–Some Accounting Officers and Authorities procure through deviation even though National Treasury has said no to such a deviation.
–Some Accounting Officers and Authorities do not request prior approval from National Treasury for single source procurements

The relevant sections in the PFMA were outlined:
81. Financial misconduct by officials in departments and constitutional institutions
(1) An accounting officer for a department or a constitutional institution commits an act of financial misconduct if that accounting officer wilfully or negligently— (a) fails to comply with a requirement of section 38, 39, 40, 41 or 42; or (b) makes or permits an unauthorised expenditure, an irregular expenditure or a fruitless and wasteful expenditure.
(2) An official of a department, a trading entity or a constitutional institution to whom a power or duty is assigned in terms of section 44 commits an act of financial misconduct if that official wilfully or negligently fails to exercise that power or perform that duty.

83. Financial misconduct by accounting authorities and officials of public entities
(1) The accounting authority for a public entity commits an act of financial misconduct if that accounting authority wilfully or negligently: (a) fails to comply with a requirement of section 50, 51, 52, 53, 54 or 55; or (b) makes or permits an irregular expenditure or a fruitless and wasteful expenditure.
(2) If the accounting authority is a board or other body consisting of members, every member is individually and severally liable for any financial misconduct of the accounting authority.
(3) An official of a public entity to whom a power or duty is assigned in terms of section 56 commits an act of financial misconduct if that official wilfully or negligently fails to exercise that power or perform that duty.
(4) Financial misconduct is a ground for dismissal or suspension of, or other sanction against, a member or person referred to in subsection (2) or (3) despite any other legislation.

86. Offences and penalties
(1) An accounting officer is guilty of an offence and liable on conviction to a fine, or to imprisonment for a period not exceeding five years, if that accounting officer wilfully or in a grossly negligent way fails to comply with a provision of section 38, 39 or 40.
(2) An accounting authority is guilty of an offence and liable on conviction to a fine, or to imprisonment for a period not exceeding five years, if that accounting authority wilfully or in a grossly negligent way fails to comply with a provision of section 50, 51 or 55.

Discussion
Mr B Martins (ANC) thanked the presenter saying the items raised in the report are clearly articulated. However, if there are no consequences for misdemeanours there will be problems and that cuts across all government departments and entities. The fundamental concern they should address is that there should be consequence management. If there is no consequence management they will keep on coming back to Parliament to deal with the same issue year after year, and this has happened for quite a number of years because there are certain departments and entities that are known to have developed a mechanism of getting around all the legislation that government has.

Therefore, the fundamental issue is that if the Director-General as accounting officer is not going to be held accountable in his/her personal capacity this habit will continue because there is no consequence management for any warm body. Unless measures are put in place to have warm bodies account for the actions or lack of actions, then there will be problems going forward, and they will come back year after year with the same story.

Ms M Manana (ANC) welcomed the presentation which is an eye opener. The problem they are facing is bigger than they think. It is very depressing to listen to this as it is an indication that corruption is so rife and few people are benefiting out of this whilst the majority of people are suffering. If they continue like this, one day the masses will rise up. She is not sure if the Auditor General legislation can help them but really people must know that corruption is rife.

Ms D Senokoanyane (ANC) thought the presenter will give them the information around each deviation and expansion. It would be very useful for Committee oversight purposes to get information as to who has done what, and how. The Office of the Chief Procurement Officer is very important within Treasury as it was established to deal with these challenges. It would have been good to indicate what systems they have put in place to deal with the challenges and that the OCPO was not put there for nothing.

Ms Senokoanyane asked what OCPO is doing about consequence management and lack of enforcement of laws in departments that reflect financial misconduct in terms deviations and expansions. What assistance is required from the Committee on this? She asked about the SETAs that lack capacity as has been indicated in the report.

Mr A McLaughlin (DA) said the positive that comes out of this presentation is that they are aware of the situation but the problem is that they are not applying the law and not a single person has been sent to jail. They are not applying the law and there is a reason for that and they need to find that reason and address it. They cannot do anything at the moment as it is an issue of political will. Charges need to be laid with the police and let the police do their job without any interference. The Committee needs to make a recommendation and include the Police Portfolio Committee that this needs to be addressed urgently and something needs to happen about this.

Mr N Gcwabaza (ANC) said when these irregular deviations and expansions happen, accounting officers are part and parcel of this problem because they collude with the people who are alleged to have made these deviations and expansions. And when these people are exposed, the accounting officers do not take action against those people. They understand that those who are involved in these deviations and expansions are Heads of Departments, Finance Officers and Supply Chain Management officials.

Mr Gcwabaza asked what the role is of National Treasury in reporting to Parliament. Is there a corrective measure which is provided by the Public Finance Management Act (PFMA) to deal with irregular deviations and expansions? Is there action that can be taken against an official found to have made such a deviation or expansion? Is it possible to take that information to the police to prosecute that official? Is there a need for amendment of PFMA so the Office of Chief Procurement Officer can be effective and be able to deal with officials that transgress the law?

The Chairperson asked what Treasury considers as normal or abnormal deviations and expansions because in terms of the expenditure report as a norm anything above 30% is not acceptable. Is the deviation within the norm or not, clarity is needed there? On slide 7 of the report Treasury also has deviations. She asked what the norm. With the current measures, it does not seem Treasury is improving in reducing deviations and expansions because Eskom is currently sitting at 47 deviations. She asked what could be done to remedy this and what Parliament can do to assist. Tomorrow Treasury will give a workshop on supply chain management, but Treasury should also advise on how best they can intensify their oversight so that they can actually turnaround their oversight strategy.

The Chairperson asked if all the State Owned Enterprises (SOEs) have submitted their procurement plans to OCPO because there were SOEs that did not submit their procurement plans. There had been a call about the implementation of those procurement plans.

Mr Tshitangano replied that the information about procurement plan submission will be provided to the Committee. Every quarter they publish all the procurement opportunities and the reason is they want all potential suppliers to go to the list to decide whether to tender for a particular tender or not. Previously only certain suppliers would be given tender information by government officials so that they could prepare in advance before the tender is advertised. Now everybody has an equal opportunity. In other words suppliers can decide before a department advertises whether they would like to tender and then prepare for that. A report would be provided to the Committee that will indicate who submitted and who did not submit.

Mr Tshitanango replied about normal and abnormal deviations that they do not have a percentage threshold but they assess the trend of a particular department which has submitted deviations. If it submits deviations and they assess and find that it submitted three deviations and they are valid, that is acceptable. For example, with the Presidency declaring a semi-state or full state funeral, they will procure through deviations. Obviously one cannot make an appointment with death, there might be only one deviation but then there may be five deviations. One would not say they did not comply with the norm. If they have submitted five deviations because of deaths it is not abnormal. The law states that a normal deviation is if it is emergency and it can be proven to everybody that it is an emergency. Then they do not have a problem, even if one submits 10 because there were 10 emergencies.

However, it is very different when it is the Department of Water and Sanitation and Department of Agriculture and they were aware for the past two years that there will be drought, and they come at the eleven hour to claim drought. In such a situation one will be talking about abnormality. What is important is that people must comply with the law which allows them to deviate when there are emergencies, and when it is a sole supplier. The law allows them to do that. One cannot have a threshold because it will be problematic.

Again if they check the problems they had with SASSA on the Cash Paymaster Services (CPS) matter, SASSA waited knowing that the CPS contract is going to expire in March 2017. They waited until the eleventh hour and then came to Treasury and asked for the extension of the CPS contract. This is self- created emergency, even in court they were told this is self-created emergency.

Mr Tshitangano said what is good in this country is that the laws are there and are known by all institutions, NPA knows which laws it must use, National Treasury knows which laws it must use, and accounting authorities know which laws they must use. What is lacking is implementing these laws. If they check the trend and look at the contribution of irregular expenditure and see who the people being dismissed, they are junior officials who are doing small things. But senior officials and key players are not dismissed. This is a political problem which National Treasury can do nothing about because if there is misconduct on the part of DG of a department who is about to be disciplined, then he is told to resign, and he resigns. The next day he is appointed as a political advisor somewhere else. What can National Treasury do about this? These problems are known as it is resign and be posted somewhere else. Those poor performers are the ones that are rewarded by the system.

He gave the example of when they went to Madibeng municipality to investigate. When they requested documents, they were told they will get them the next week. When they phoned the next week they were told the supply chain management team and the mayor is no longer there. There is a new team, the municipality is under administration and they could not find the documents. Therefore, this is not a National Treasury problem. If the Committee asked him what he has done when Madibeng municipality refused to give him the documents, it can be shown that they tried to write to the mayor and they wrote to the Minister of Finance, and the Minister wrote a responding letter but nothing happened.

They always follow up on these issues. When they wanted to do a review at SABC they had to request documents from the CEO, who refused to give them documents and referred them to the Board Chairperson. The Chairperson wrote and said he will not give them the documents because he still was going to talk to the Minister. The Communications Minister wrote a letter asking why Treasury wanted the documents as he has never been briefed about this forensic audit. The Minister said he will instruct the SABC to give them the documents. Yet even today they have not received the documents. This thing is happening in all the government departments and entities. These are examples of what is happening because the system that one uses to fight corruption is the same system that prevents one from doing so.

Mr Tshitangano replied that the requested information is available. What they normally do is give the Committee that long list of deviation and expansion requests. Members can then go through the list in their own time and can identify and request those they have interest in. They will be provided with the request letter that comes from the institution and be given the Treasury responses.

The Chairperson thanked National Treasury for the report and responses. They will continue to engage on this because a solution to deal with corruption needs to be found, and this is a recurring problem in government. The Committee needs to take this matter forward to the Minister so it can be addressed properly because accounting officers need to account for their actions.

The meeting was adjourned.