In this, the third of our six-part series on the unfolding education crisis, we examine the Limpopo textbook contract against the requirements of the Public Finance Management Act and other tender regulations, highlighting the “irregularities” that have characterised this particular deal.
Media professionals are free to use all copy and photographs from this series on condition Corruption Watch is credited as the source.
So what exactly are the offences facing the Limpopo education department officials involved in the education meltdown in that province – and what is it about their conduct that points to corruption? By examining a number of laws and regulations we show you exactly where things went horribly wrong …
Flouting the Public Finance Management Act, treasury regulations and supply chain management rules are behind the undoing of at least 22 officials from the department, who now face disciplinary action and possible criminal action.
The Public Finance Management Act regulates the management of finances in national and provincial government and sets out the correct procedures for efficient revenue management, expenditure, management of assets and liabilities, as well as duties and responsibilities of officials.
The offences the Limpopo education officials are accused of range from gross negligence to financial misconduct and fraud. The fraud charges related particularly to double payments to some companies.
It’s highly likely that the number of officials facing action may grow, as probes by the Special Investigating Unit (SIU), the Hawks and the public protector Thuli Madonsela continue.
Officials being investigated include the present Limpopo education department head Morebudi Thamaga and its chief financial officer Martin Mashaba; as well as members of the bid evaluation committee and bid adjudication committee who decided on awarding tenders to questionable suppliers; supply chain management members; and senior managers within the department.
Although the disciplinary charges drawn up by the SIU concentrate on the officials’ contraventions under the Public Finance Management Act and treasury regulations, there is other legislation that applies here too.
Selwyn Hockey, managing director of Webber Wentzel in Cape Town, said when officials award a tender or procure goods, they also need to be mindful of the Municipal Finance Management Act, the Preferential Procurement Policy Framework Act as well as the Constitution.
The report by the SIU reveals fruitless and wasteful expenditure through the awarding of multimillion-rand tenders without following due process, procedural flaws in the bid adjudication, duplicate payments to service providers, overpayment for services, budget increases to bidders without following proper procedure, and fast-tracking over 40 infrastructure contracts.
Below is a summary of the SIU’s charges:
Nhluvuko Consulting JV
- Contracted amount by joint venture exceeded by R43.5-million because a pre-tender estimate was not available to Bid Evaluation Committee (BEC) members and payments were authorised without ensuring deliverables had been achieved.
Project management unit
- Fast-tracking 40 projects by the Bid Adjudication Committee (BAC) without approval from Limpopo’s treasury.
- Awarding a R95-million contract to Aurecon and its joint venture partners, Tubatse Consulting and MOT Professional Service Consultancy, despite their bid being R45-million higher than the lowest bid. The SIU said there was misrepresentation by the official involved “via a comparative cost analysis based on time to be spent on the project, that Aurecon joint venture was ranked number one in terms of price”.
- Questions about payments that were not outlined in the service level agreement with a supplier and expenses not supported by documentation.
- The process for creating a database from which contractors were appointed was flawed.
Duplicate and multiple payments
- There were cases of duplicate payments which national treasury is now trying to recover. Two cases of possible fraud are being investigated, and in one case a payment was made out to a printing company without payment being authorised.
Incorrect transfer of payment
- Changing bank details of a supplier, Freedom Stationery, without proper authorisation. This resulted in R29-million being transferred to Bila Enterprises instead.
Learner teacher support material project
- Irregular approval of a R19-million budget increase to EduSolutions for procurement and distribution of prescribed textbooks. This is the contract that Solly Tshitangano blew the whistle on in 2010, but it was only two years later, in April 2012, that the national Department of Basic Education cancelled the tender. Despite Tshitangano being fired for his efforts, the Department of Basic Education used Tshitangano’s information as evidence to justify cancelling the contract.
- Certifying and paying for goods without ensuring they had been delivered to the warehouse, and then indicating that they had been delivered when they had not.
- Contraventions that involve the procurement and payment of grade R toys and science kits. A payment was also made to a supplier who had not correctly invoiced the department or provided supporting documentation.
- Approval of discounts relating to science kits provided by EduSolutions.
Purchase of a maths software program
- There was an irregular procurement process followed, approval of deviations from normal supply chain management processes, approval without proper feasibility studies being done, and payment to a service provider not registered on the supplier list.
- Some R15-million was paid for software licences, but pupils could not use the computer program because schools were not equipped with the necessary infrastructure.
- Part of the R15-million paid included R1.8-million in VAT – however, this supplier was not entitled to VAT because it was a foreign company.
Sections of the Constitution flouted by Limpopo’s education department
The overarching requirement is outlined in section 217 of the Constitution, which requires that procurement to be "in accordance with a system which is fair, equitable, transparent, competitive and cost-effective”.
The officials’ main contraventions of the Public Finance Management Act related to section 45, which deals with the responsibility of officials, and section 81, which deals with disciplinary proceedings.
Those sections also bind officials within education departments to sections 38, 39, 40, 41 and 42 which deal with the responsibilities of accounting officers.
Section 45 requires officials to ensure that financial management and control of the department is carried out within the official’s area of responsibility. It holds officials accountable for the “effective, economical and transparent use of financial and other resources within that official’s area of responsibility”, and requires the official to prevent unauthorised or irregular expenditure, or fruitless and wasteful expenditure.
Section 81 makes it possible to institute disciplinary proceedings against an accounting officer who commits an act of financial misconduct by “willfully or negligently failing to comply with the general responsibilities of accounting officers and or makes or permits an authorised expenditure, an irregular expenditure or a fruitless and wasteful expenditure”.
In terms of the Public Finance Management Act, all departments must appoint an accounting officer to ensure that money is managed effectively, efficiently and transparently. He or she is required to maintain an internal audit system and a system for evaluating projects, and keep full and proper records so they can be submitted to the auditor-general and provincial treasury.
Treasury regulations flouted by Limpopo’s education department
Section 16 of treasury regulations deals with supply chain management and requires that officials apply fairness, equity, transparency, competitiveness and cost-effectiveness in implementing supply chain management processes.
The regulations do make provisions for diversions from normal procedures in limited circumstances, which allow for “fast-tracking” of projects, but only in very specific circumstances. Sound reasons would need to be put forward and properly recorded.
Incompetence or corrupt relationship?
“While massive irregularity in the awarding and management of very large tenders seems beyond doubt, the question that has to be answered is why?” comments Corruption Watch executive director David Lewis.
“Was this purely a result of incompetence or inadequate management systems – or was there a corrupt relationship between the purchasers in government and the firms supplying them?”
“If it’s found that officials were incompetent, then there is sufficient evidence from the SIU investigation for disciplinary action and criminal sanction provided for in the Public Finance Management Act, and other legislation,” Lewis says.
“However, if the investigations reveal a corrupt relationship between government officials and companies then the offence falls under anti-corruption legislation, and more severe criminal sanctions would apply. The companies involved should also be blacklisted.”
Next week we’ll pick apart the roles and powers of the various investigative and administrative agencies involved with the Limpopo case, and identify what they are doing to resolve the crisis.