Youth Development Second Wave Anti-corruption in South Africa - COVID-19 relief fund characterised by mismanagement!
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This report will be a useful tool to monitor whether the control weaknesses that open up the funds to abuse are being closed and whether instances where abuse had already happened, were appropriately dealt with.


South Africa (03 September 2020) – Poor financial management by public institutions once again reared its ugly head during the disbursement of COVID-19 relief scheme funds, an audit report has found.

The synopsis is contained in Auditor-General Kimi Makwetu’s first of a series of special reports on the financial management of government’s R500 billion COVID-19 relief package. The package was announced by President Cyril Ramaphosa in March in response to the impact of the COVID-19 pandemic on the economy. Due to the extent of the findings, the office of the AG will now forward a list of potentially fraudulent cases to the multi-agency fusion centre – the Special Investigating Unit and law enforcement agencies – for swift follow-up investigations and possible prosecution.

While the relief package totalled R500 billion, the AG’s report focused on R147.4 billion allocated through the supplementary budget of June 2020. A bulk of this was distributed to support for vulnerable households (R40.9 billion); health (R21.54 billion); support to municipalities (R20 billion); other frontline services (R13.62 billion); basic and higher education (R12.54 billion). The rest was distributed among other services. Of this, R68.9 billion (47%) had been spent by July 2020.

Makwetu first cast the spotlight on the payment of the temporary employer/employee relief scheme (TERS) and social grants. These were introduced to provide economic relief to the vulnerable and assist employers to protect jobs.

“By 31 July, the Unemployment Insurance Fund (UIF) had paid just over R37 billion in TERS benefits, and the South African Social Security Agency (SASSA) had paid R19.6 billion in social grants,” the Auditor-General said.

In this regard, Makwetu said the new system implemented for TERS incorrectly calculated the benefits for the first lockdown period (27 March to 30 April) by not taking into account the actual period of inactivity and the portion of the salary paid by employers, resulting in significant overpayments.

Analysing payment data and checking the beneficiary information against other government databases, the Auditor-General flagged several payments that require investigation.

The office is now verifying payments made to ineligible recipients. Among these are people beyond the legal age of employment, deceased, working in government, receiving social grants, or students funded by the National Student Financial Aid Scheme.

“Recalculations of claims and reconciliations with payment data identified overpayments, underpayments, duplicate payments, and discrepancies such as approvals for payments made before the date of application.”

Makwetu said there was also poor input and validation controls on the new system, and a manual claim submission process used in the first two weeks of implementation further heightened the risk of invalid or manipulated claim information.

This was also the case in the payment of the R350 relief funds, which, the report finds, was paid to people who are not in distress or ineligible.

Turning attention to the procurement of personal protective equipment (PPE), Mkwetu said audits were in different stages of completion. However, the office’s data analyses of orders placed by health departments identified that some items were priced at more than double and even five times the prescribed price.

By June 30, R6.4 billion of R22 billion had been used on health-related services.

“Similar instances were identified in the procurement of PPE in the education sector, where the national and provincial departments are not procuring PPE at market-related prices,” Makwetu said.

Although emergency procurement processes were allowed for procuring PPE, this did not mean all supply chain management requirements were relaxed.

“Teams are still busy auditing the procurement processes, but are identifying matters such as suppliers not having valid tax clearance certificates, quotation and competitive bidding processes not being correctly applied, inadequate or inaccurate specifications and evaluation criteria and the incorrect application thereof, conflicts of interest, and the awarding of a contract in the health sector to a supplier with no previous history of supplying or delivering PPE,” said the AG.

Quarantine sites

The Auditor-General said while 6 123 quarantine sites were initially targeted, only 510 sites had been identified by the Department of Public Works and only 192 activated for use by the Department of Health.

“It is unlikely that government will pursue the original target for quarantine sites, as the demand for such facilities has been relatively low,” he said.

Field hospitals

While R4.8 billion was made available for 66 field hospitals across the country, only 18 of these projects had been completed by 30 June.

“The audit of the procurement processes for appointing contractors only recently commenced as a result of delays in providing us with the information and documentation requested, but the audit teams have already identified non-compliance with legislation in the processes followed,” Makwetu said.

This, he said, is another area in which there is a need for closer cooperation between the Health and Public Works Departments to monitor the demand for additional beds and the implementation of the initiative.

In his closing remarks, Makwetu urged all oversight structures to examine the report to direct oversight actions. He called on accounting officers and executive authorities to account for the implementation of the COVID-19 initiatives and the management of the funds.

“This report should become the baseline for oversight’s interrogation of how the multi-billion rand fund made available for the COVID-19 response was used. Our upcoming reports will also be a useful tool to monitor whether the control weaknesses that open up the funds to abuse are being closed and whether instances where abuse had already happened, were appropriately dealt with,” he said.

Sources: Auditor-General Kimi Makwetu Report
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Recognised as one of the Mail and Guardian’s Top 200 Young South African’s as well as a Primedia LeadSA Hero, Brent is a change maker, thought leader, radio host, foodie, vlogger, writer and all round good guy.

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