For accounting officers or Accounting Authorities of the DWS (as well as for other departments and perhaps even other spheres of government with comparable challenges) to prevent incidents of irregular expenditure, this section provides some practical recommendations on how to address the identified findings, and proposes and discusses a framework to assist in preventing irregular expenditure.
Informed by the key research findings outlined above, the following recommendations are aimed to improve the effectiveness of the regulatory measures to prevent irregular expenditure.
Obviously, the constant reliance on frameworks from NT is not enough to regulate the incidents of irregular expenditure. Furthermore, the failure to develop a SOP manual resulted in not complying with the PFMA (National Treasury
The accounting officer should develop an internal SOP manual to provide clear instructions to officials how to execute their day-to-day tasks when managing incidents of irregular expenditure. The SOP will also assist in achieving a clean audit (AGSA its objectives and effective implementation date; legislative frameworks in line with the PFMA ( processes to identify, assess, and report to the relevant authorities, for example NT and AGSA; confirmation, determination, records, investigation, and condonation of the non-compliance which results in irregular expenditure. In doing so, the accounting officer should align the SOP to the NT frameworks issued to regulate irregular expenditure to all national departments. By assisting officials responsible for procurement of goods and services to be aware of what is expected of them, such SOPs help hold officials responsible for their actions, thus contribute to reducing incidents of irregular expenditure.
The SOP should be approved by the accounting officer for implementation. This ensures accountability and reveals management’s commitment to reduce, inhibit an increase in cases of irregular expenditure and to improve audit results (AGSA
The prioritisation of adequate training on the NT legislative frameworks to all the officials will ensure that there is a common understanding of how these legislative frameworks should be implemented (including adherence to NTIEF) (
Since the performance management process requires a performance assessment to be conducted twice a year (
Regular monitoring should be done by supervisors to timeously identify training gaps and retrain officials.
Since officials responsible for incidents of irregular expenditure were not held accountable for their actions, the successful implementation of the regulatory measures remains constrained. Therefore, a consistent implementation of consequences for transgressions is necessary. It will also reveal management’s commitment to manage non-compliance with SCM processes, PFMA, TR and PPPFA, and help improve compliance with the PFMA (
Consequence measures for transgressions need to be implemented, for example, disciplinary action and recovery of the amount declared as irregular expenditure from responsible officials irrespective of the rank or position occupied in the Department. Besides limiting incidents of irregular expenditure, this will also help to achieve clean audit or unqualified audit opinion for the institution (AGSA
To improve oversight responsibilities, the accounting officer should provide quarterly consequence for transgressions reports to the Audit Committee, AGSA, NT and Departmental Executive Committee. The reports should include,
Obviously, the legislative frameworks to manage irregular expenditure need to conform to the SCM regulatory circulars. A regular review of such frameworks (e.g. exploring leading practices or regularly searching the NT website amendments to such measures) would ensure that departments keep abreast with the changes in the processes. The following recommendations are proposed:
The accounting officer should review the implemented legislative frameworks to manage irregular expenditure at least annually to conform the current processes and changes in the irregular expenditure processes. This will ensure that new irregular expenditure trends are identified and incorporated in the legislative framework to deal with irregular expenditure.
Any changes to the irregular expenditure processes should be included in the regulatory measures and communicated to the officials. This will enhance timeous identification and inhibit new irregular expenditure trends.
To deal with the ineffectiveness of the implemented mechanisms to identify and inhibit irregular expenditure, mechanisms such as ongoing appraisals of the current processes to identify and inhibit incidents of irregular expenditure should be conducted at least quarterly. This will also assist the DWS to comply with the PFMA (
The accounting officer should establish mechanisms such as an SCM Performance and Monitoring Unit to validate all procurement of goods and services before contracts are awarded. This will ensure timeous identification and reduction of non-compliance with SCM processes, PFMA, TR and PPPFA.
Internal audit should conduct proactive audits of all the contracts which are due for issuance before the final award is granted – ensuring that contracts not in compliance with the SCM processes, PFMA, TR and PPPFA are not issued so that irregular expenditure can be mitigated before occurrence.
The accounting officer should – after an appropriate screening process – appoint suitable and experienced SCM practitioners as members of the Departmental Bid Adjudication Committees.
SCM practitioners should conduct adequate quality reviews of all procurement documents submitted for procurement of goods and services to ensure that all the documents comply with the SCM processes and related legislation.
The study uncovered that measures were not developed and implemented. The development and implementation of measures to avert a recurrence of similar root causes of irregular expenditure (such as a finding tracking register to monitor the recurrence of such root causes) would assist in mitigating the recurrence of incidents of irregular expenditure and ensure adherence to the NTIEF (
The accounting officer should develop an audit action plan based on the internal and external audit findings. It will assist departments to monitor the findings raised by the auditors and to determine the measures that should be implemented to avoid a recurrence of irregular expenditure. The audit action plan should include findings, root causes, agreed implementation dates, responsible officials, and proposed action plans.
The accounting officer should submit quarterly progress reports on the implementation of the action plans for monitoring purposes to the Audit Committee and Departmental Executive Committee to enhance the oversight responsibilities and to ensure that the action plan is implemented properly.
The identification of the responsibility to investigate irregular expenditure establishes accountabilities for all investigations of revealed incidents. Furthermore, the development of an internal process to investigate such incidents will ensure consistent checks and balances of irregular expenditure to avoid reliance on NT regulatory measures. Following both proposals will lead to compliance with the NTIEF (
decide on the level of investigations to be undertaken to confirm whether the expenditure meets the definition of irregular expenditure (PFMA
establish a system on internal control which includes the development of a standard process to investigate incidents of irregular expenditure.
The following recommendations are hence proposed:
The accounting officer may identify Internal Audit or another section independent of the SCM process that will be responsible for investigating all incidents of irregular expenditure. The section to be identified should have the necessary skills and experience in investigation processes. This will ensure that incidents of irregular expenditure are investigated timeously within the approved timelines and necessary corrective measures can be taken.
The accounting officer should define and approve the terms of references of such a section clearly for accountability purposes. These terms of reference should include the purpose of the section, authority, focus area, roles, and responsibilities giving the section unrestricted access to persons and documents as well as ensuring that it can execute its work without interference. The details of the responsible section should be communicated to all the officials at the DWS to ensure that its role is clear and understood.
The identified responsible section to investigate incidents of irregular expenditure should develop an internal process or methodology to investigate such incidents. The development of the process would ensure that all incidents of irregular expenditure are investigated. The process should outline the purpose of the methodology, the scope of the methodology, regulatory frameworks, and process to be followed when incidents of irregular expenditure are reported to the responsible office. The internal process or methodology should be approved by the accounting officer for implementation and ensure accountability. This will further demonstrate management’s commitment to avoid an increase in cases of irregular expenditure.
Ongoing oversight by the Audit Committee through consequence management reports would ensure timeous detection of control weaknesses in the monitoring mechanisms to inhibit irregular expenditure and recommend improvements. Furthermore, this will ensure compliance with paragraph 27 (1) (8) (a) of the TR (
The Audit Committee should request quarterly transgression consequence reports from the accounting officer to ensure accountability of all the officials found liable for incidents of irregular expenditure. The reports should include,
Measures such as consequence for transgressions of irregular expenditure should be a standing agenda item on the quarterly Audit Committee to ensure adequate oversight.
The previous sections revealed that:
the DWS did not develop an SOP to regulate incidents of irregular expenditure;
incidents of irregular expenditure were not investigated, and, among others;
there was no plan of consequences for transgressions leading to irregular expenditure in place.
In response to the problem of non-compliance with the SCM processes, PFMA, TR and PPPFA, a framework has been developed. The proposed framework is aimed at addressing the challenges of the DWS, strengthening the procurement process and to inhibit further cases of irregular expenditure. Moreover, it should also ensure that those who are found liable for irregular expenditure are held accountable.
Initially, the proposed framework comprised of the following five elements: identification of the non-compliance or weakness including the root cause, identification of role-players who will be accountable, identification and implementation of preventative or corrective actions, setting deadlines, and monitoring progress. It was then discussed with the participants to ensure its applicability for the DWS environment. This led to the inclusion of the following six elements: purpose of the framework, definition of irregular expenditure, types of irregular expenditure, regulatory frameworks, assessment and confirmation of the non-compliance or weakness, and investigation of irregular expenditure.
The final proposed framework to manage irregular expenditure and to identify corrective measures to inhibit irregular expenditure (see
Proposed framework to manage irregular expenditure and identification of corrective measures.
Assist officials to identify the types of irregular expenditure.
Outline the steps to be followed by the accounting officers when dealing with incidents of irregular expenditure.
To sensitise the officials about the consequences of committing irregular expenditure.
Sourcing goods and services without inviting competitive bids. Example: procurements of goods and services above R500 000 not executed according to the legislated tender process.
Non-compliance with delegations of authority. Example: procurement of goods and services approved by official who do not have the authority to do so.
Procurement of goods and services exceeding the approved threshold without prior approval from the accounting officer.
Tenders not evaluated according to the evaluation criteria.
Tenders not advertised for the duration of 6 weeks.
Appointment of suppliers who are not tax compliant.
Lack of motivation for deviating from SCM processes.
Issuing tenders without adjudication by the Bid Adjudication Committees.
Non-compliance with the SCM processes, PFMA, TR and PPPFA.
The
Treasury Regulations (
National Treasury Guideline on Irregular Expenditure (
identify the root cause of the irregular expenditure;
determine whether the department has suffered any loss or derived any benefits;
help the department to improve the audit results.
The investigator should be granted unrestricted access to records, officials or personnel who are legally contracted by the department. Failure or lack of cooperation with the investigator should be reported to the accounting officer. Once the investigation is completed, the investigator should compile a report of its outcomes. This report should indicate the root cause leading to non-compliance, the impact of the transgression, information of any corrupt or fraudulent activities if any, the official responsible for the non-compliance, and any loss suffered by the department or its entities.
Where the outcomes of the investigations indicate that no loss has been suffered, training should be provided to the official responsible, and the departments accounting officer should apply for condonation of the irregular expenditure. The training will ensure that the officials are familiarised with the procurement process and sensible of what is required of them with respect to their roles and responsibilities, by clarifying how they can inhibit such cases.
Where the investigations indicate negligence or failure to adhere to the SCM processes by the responsible official, the accounting officer should institute disciplinary action against the responsible official. Disciplinary action will illustrate commitment by management to deal with non-compliance with the SCM processes and deter future cases of irregular expenditure. If the outcomes of the disciplinary reveals that the official is guilty, the chairperson of the disciplinary committee will impose sanctions such as punitive suspension or recovery of the money (Consequence for transgressions) from the responsible official.
Where investigations reveal any fraudulent activities or corruption, the matter must be reported to the law enforcement agencies such as the South African Police Services within 7 days for criminal charges against the responsible official. This will illustrate management’s seriousness to manage irregular expenditure.
Instituting disciplinary actions – As required by the Public Service Co-ordinating Bargaining Council (PSCBC), the accounting officer should establish a disciplinary committee to be chaired by an independent chairperson to institute disciplinary action against the relevant official within 60 days of the investigation (
Training of official – Within 30 days of the investigations, the accounting officer should identify training interventions to train the official on the prevention of irregular expenditure. Training officials will ensure that the preventative measures are implemented.
Referral of the matter to the law enforcement agencies such as the South African Police Services – within 7 days after the investigation to institute criminal charges.
Recover the money from the responsible official – within 30 days of the sanction: the accounting officer should create a debt account for the responsible official and the money should be recovered according to the agreed instalments until the debt has been settled in full.