Auditor General uncovers major flaws and corruption in South Africa’s R500 billion coronavirus funding

Auditor-general (AG), Kimi Makwetu, has published a report on the multi-billion rand Covid-19 relief package and how it was spent by various government departments.

After the outbreak of the coronavirus in South Africa, government announced a R500 billion package for the health response and economic distress caused by the drastic measures that had to be taken to contain the spread of the virus.

The relief package has been funded by reprioritising the 2020-21 budgets and securing loans.

On request of president Ramaphosa, Makwetu’s office undertook a real-time audit of 16 of the key Covid-19 initiatives introduced by the government, and the management of R147.4 billion of the funds made available for these initiatives.

The report shows that IT systems used in government were not agile enough to respond to the changes required. In addition “pre-existing deficiencies” in the supply chain processes of government, such as corruption, were ‘amplified’.

“Based on what was audited to date, there are clear signs of overpricing, unfair processes, potential fraud and supply chain management legislation being sidestepped.

“In addition, delays in the delivery of personal protective equipment and quality concerns could have been avoided through better planning and management of suppliers.”

Some of the most egregious examples from the report are outlined in more detail below.

TERS benefits

  • A 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.
  • A high number of payments were flagged that require investigation. These include payments to people who are below 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.
  • 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.

R350 social grants

  • There is a risk that the R350 social relief grant is being paid to people who are not in distress. The application process includes very limited verification to determine if the applicant is receiving other income and provides opportunities for people such as students or scholars older than 18 to also get access to the grant.
  • The auditor-general said that the government databases to check if applicants have alternate sources of income were not sufficient and that it flagged payments to over 30,000 beneficiaries that required further investigation. These include payments to beneficiaries employed in government or that received other sources of income such as other social grants, government pension, UIF payments and benefits from other relief funds.
  • Changes to the IT system to enable the payment of the top-up grants could not be completed in time for the May grant payment and a manual workaround was used with few controls to prevent mistakes. This resulted in duplicate payments and some beneficiaries not receiving their grants – these issues were subsequently corrected.

Farmers relief

The audit identified inadequate record-keeping and reconciliations of vouchers approved, distributed and redeemed, which increases the risk of unreliable reporting by the department and undetected fraud or error.

Concerns were raised with the department on the inadequate and unfair process followed to select the suppliers utilised for the redemption of vouchers and beneficiaries who might not be eligible for the vouchers.

Sports, Arts and Culture relief fund

The Department of Sports, Arts and Culture established a R235 million relief fund to assist artists, athletes and technical personnel affected by cancellations of sport and art events and to fund digital solutions.

The progress of distributing the funds has been slow with large numbers of the applications rejected originally and now being re-evaluated. By 3 July, only R39 million was paid out.

The audit identified that the original criteria used to evaluate applications were not specific enough to prevent double-dipping and subsequent amendments thereto could result in an unfair process.

Loans through the Industrial Development Corporation

The Industrial Development Corporation ring-fenced R2.5 billion in funds to provide as loans to their clients and other businesses operating in sectors within its mandate.

The audit team determined that specific criteria for the provision of the loans were established and sufficient preventative controls were in place.

By 15 July, no loans in respect of debt relief had been approved yet, as the businesses did not comply with the qualifying criteria.

Procurement of personal protective equipment (PPE)

Some of the key issues identified in the PPE procurement included;

  • There are delays in the delivery of PPE;
  • PPE are not always procured at market-related prices;
  • There are deficiencies and non-compliance in PPE procurement processes;
  • There are insufficient controls to ensure the receipt and payment of PPE at the levels of quality and price ordered.

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Auditor General uncovers major flaws and corruption in South Africa’s R500 billion coronavirus funding