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Forensic Audit PresentationPortfolio
CommitteeCape Town 15 May 2007
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BACKGROUND

• FINANCIAL MISMANAGEMENT CONCERNS
• Ministerial decision to institute a forensic
  audit
• PFMA compliance on Tender processes
• LEADERSHIP
• General leadership wanting
• Financial Performance
• Auditor Generals successive disclaimers
• 2002/2003
• 2003/2004
• 2004/2005

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PERIOD UNDER REVIEW

• 1st April 2003 31st December 2004
• Tender awarded to Gobodo Forensic Investigative
  Accounting 20th April 2005

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GOBODOs MANDATE

• Data interrogation
• Identify, classify and investigate irregularities
• Forensic Accounting Financial Investigation
• Review tender procurement processes
• Asset management disposal
• Perform due diligence investigation of key
  suppliers
• General financial management
• Information Security
• Review the security, integrity confidentiality
  of info
• Review program change controls
• Review business continuity
• Review EFT transactions cash payments
• General review of computer systems

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FINDINGS

• PECAS Systems (Printers Estimating Costing and
  Scheduling system) violation
• SD K Alpha - Excessive procurement
• 16 random samples between April 2003 and Dec 2004
• Irregular expenditure R21,0mn
• Violation of delegated authority p58 art 6.18
  p75
• Contraventions of section 45(b) (c) PFMA
• SD K Beta
• Distribution not done according to standard
  acquisition policy procedures R40,0mn
• Minutes and contracts missing!!!
• Violation of delegated authorities p57 art 6.17
• Contraventions of s 45(b) (c) PFMA

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FINDINGS

• REDUNDANT STOCK
• Gross Mismanagement of stores
• Consistent Overstocking (Treasury Regulation
  10.1.1(b))
• Late delivery by suppliers not penalised
• Damage to paper (TR 10.1.1(a))

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FINDINGS

• REASONS SUPPLIED FOR OVERSTOCKING
• Latent defect in PECAS system re status of task
• Improper calculation of paper needed human
  waste, consistent errors, etc
• Lack of communication between operations and
  procurement
• Late outsourcing of jobs paper nevertheless
  procured
• Urgent jobs not reflected on PECAS system
  circumvented

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FINDINGS

• PAPER PROCUREMENT SUPPLY CHAIN
• Significant difference in value btwn AFS and
  PECAS
• 2002/3 AFS raw material R 26,4 PECAS R 40,1m
  (paper)
• 2003/4 AFS raw material R 23,5m PECAS R 35,4m
  (paper)
• 2004/5 AFS raw material R 23,2m PECAS R 29,5m
  (paper)
• SIU could not confirm accuracy and validity of
  inventory amounts reflected on AFS - documents
  lost
• Contravention of TR 10.1.2

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FINDINGS

• CONTRAVENTION VIOLATION OF PFMA
• Security of records
• Lack of controls within Procurement Division

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STATUS REPORT

• SUSPENSIONS
• INVESTIGATIONS HAVE BEEN EXTENDED

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MEASURES PROPOSED

• PROPOSED DISCIPLINARY MEASURES
• Charge Sheets issued to several individuals
• Gross mismanagement
• Dereliction of duty
• Violation of tender procedures
• Lack of duly delegated authority to procure any
  goods
• All actions ultra vires TR 8.2.1
• PFMA 38(1)(h)(iii)
• Total of Irregular expenditure of R66,0mn
• Irregular expenditure R1,5mn
• Irregular expenditure R3,0mn
• Signed replenishment advises without written
  delegation
• Be charged according to the precepts of the PFMA
  TR
• Criminal and Civil charges be considered

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• THANK YOU