10 ‘irregular’ government projects in South Africa – and how much they cost taxpayers

Auditor-General Tsakani Maluleke has published the national and provincial government audits for 2019/2020, providing an overview of government spending and points of concern over the annual period.

In her first PFMA since taking office, Maluleke said that there were some ‘signs of improvement’ seen in a number of areas. However, she strongly urged government leaders to ensure ‘progressive and sustainable improvements’ in their outcomes.

“(Our office) cannot yet see the progressive and sustainable improvements required to prevent accountability failures and deal with them appropriately and consistently across national and provincial government,” she said.

One of the key focuses of Maluleke’s report are ‘material irregularities’ which have been identified at various government departments over the last few years.

A material irregularity is defined as any non-compliance with or contravention of legislation; fraud; theft; or a breach of a fiduciary duty, identified during an audit performed under the Public Audit Act.

The irregularity must also have resulted in or is likely to result in a material financial loss, the misuse or loss of a material public resource or substantial harm to a public sector institution or the general public.

A total of 45 material irregularities were highlighted by the auditor general in her report, ranging from improper tenders to stolen goods. These are 10 of the most egregious:

Delayed payments from the Department of Water – R13.4 million

  • Where: Department of Water and Sanitation
  • What happened: Delayed payments in 2018-19 to the waterboard responsible for the water infrastructure project resulted in the temporary suspension of the project. The contractor charged for standing time and interest on outstanding invoices.
  • Actions taken: An investigation by the department’s internal risk management unit completed in August 2020 found that reason for delayed payment was insufficient funds at the time and that no officials can be held responsible.

Department of Defence paid to lease unused buildings – R108.3 million

  • Where: Department of Defence
  • What happened: Lease payments made from 2015-16 to 2019-20 for unoccupied office buildings.
  • Actions taken: The accounting officer instituted an investigation in September 2020 and will take action against responsible officials and steps to recover financial loss based on outcome.

Incorrect grant payments to a supplier from Cogta – R103 million

  • Where: Department of Cooperative Governance
  • What happened: Incorrect grant payment to a supplier in July 2018 and August 2018 due to ineffective internal controls for approval and processing of payments – the department was unable to recover all money from the supplier.
  • Actions taken: Hawks, State Attorney and Special Investigating Unit took the matter to court to recover the financial loss from the supplier – currently in process.

Customers not billed for water – R346.2 million 

  • Where: Water Trading Entity
  • What happened: Customers not billed for water usage for a number of years.
  • Actions taken: An investigation was completed in February 2021, which identified significant control weaknesses that caused material irregularity. Billing of customers commenced and will continue until completed. Legal opinion is being obtained on potential impact of the Prescription Act on old water debts. Appropriate actions are planned against officials found to be responsible.

Incorrect tender process for IT systems – R148.9 million

  • Where: Gauteng’s Department of Health
  • What happened: Information technology infrastructure procured without inviting competitive bids, resulting in financial loss as cheaper alternatives were available.
  • Actions taken: In July 2019, matter was referred to National Prosecuting Authority to consider possible criminal charges and to State Attorney to consider possible civil claims.

Incorrect bidding process by Department of Transport – R21.3 million

  • Where: Department of Community Safety and Transport Management in the North West
  • What happened: A contract was awarded to supplier for learner driver training and capacitation programme in October 2015 without complying with legislative requirements for such participation. As a competitive bidding process was not followed, the ability of the supplier to deliver services was not assessed. Prepayment was made in November 2015 to the supplier for which services have not been received to date.
  • Actions taken: A criminal case opened with Hawks in 2017; investigation still ongoing. Civil claim instituted against the supplier in September 2017 through State Attorney to recover loss.

Unpaid contract for IT services – R85.2 million

  • Where: Department of Education in Limpopo
  • What happened: Goods and services were received from supplier of information technology services, but invoices were not paid as contract was cancelled when department was placed under administration, resulting in litigation and order against department to pay outstanding amount plus interest.
  • Actions taken: Department committed in September 2020 to facilitate mediation process to identify responsible parties.

Incorrect bidding process by Defence  – R250.6 million 

  • Where: Department of Defence
  • What happened: Contract for inventory and asset verification awarded in February 2017 to two bidders on 50/50 basis and not to one bidder that scored highest points in evaluation process, resulting in increased project cost.
  • Actions taken: Accounting officer did not take any action in response to being notified of material irregularity. New recommendations made as of November 2020 to resolve issue.

Multiple issues with procurement of trains  – R2.2 billion 

  • Where: Passenger Rail Agency of South Africa
  • What happened: Multiple instances of non-compliance in procurement process for locomotives in July 2012 resulted in contract being unfairly awarded. Prepayment of R2.6 billion was made to supplier, but auditee derived no value as locomotives were not fit for purpose. Supplier applied for liquidation in December 2018, making recovery of financial loss unlikely and resulting in R2.2 billion in debt owed by supplier to auditee being impaired in 2018-19.
  • Actions taken: Accounting authority cancelled contract with supplier and Special Investigating Unit has been investigating matter since 2015. No further actions were taken. Further recommendations made as of March 2020 to resolve issue.

Contract failed to complete construction – R20.2 million 

  • Where: Department of Human Settlements in the Free State
  • What happened: Contractor paid from 2014-15 to 2016-17 for development of community residential units in Thabong that was not completed. New contractor had to be appointed to complete work.
  • Actions taken: Accounting officer did not take any appropriate actions to resolve material irregularity .Further recommendations to be implemented by 21 July 2021 to resolve issue.

Read: Government wants to cut queue times at the Post Office to no longer than 7 minutes

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10 ‘irregular’ government projects in South Africa – and how much they cost taxpayers