Anti-corruption update

Report on progress made by National Audit Task Team

August 2010

1. Terms of reference2. Areas under investigation3. Ongoing SIU investigations

1. Subsidy fraud in provinces2. Subsidy fraud in municipalities

4. National Audit Task Team investigations

1. Probes into housing syndicates2. Probes into dodgy contractors

Overview

April 2007: SIU appointed to investigate fraud and maladministration in respect of low-income housing schemes (President Mbeki issues Proclamation R7 of 2007)

November 2009: National Audit Task Team appointed by Minister, headed by SIU, with mandate broadened to include fraud, corruption, maladministration and shoddy construction across housing delivery process

July 2010: President Zuma renews initial 2007 SIU Proclamation on human settlements (now R35 of 2010), enabling National Audit Task Team to continue its work post April 2007

Background

National Audit Task Team identifying and uncovering blockages and impediments to delivery

These include: Shoddy construction Continuous contracting of same bad contractors. Inordinate delays People in housing queues for years People selling government houses Illegal occupation of government houses Nepotism Abuse of the waiting list system

Audit Task Team terms of reference

Two dimensions to Task Team’s work: Punitive process

▪ Arrest▪ Charge▪ Convict ▪ Jail▪ Recover government money

Corrective process▪ Improve systems▪ Develop new controls and measures.

Terms of reference

Ongoing SIU investigations

1. Subsidy fraud in provinces

2. Subsidy fraud in municipalities

AG ordered investigation into 7 353 government officials suspected of subsidy fraud. Of these: 930 government officials arrested 761 government officials found guilty and convcted R21.7m recovered through acknowledgement of debt

SIU found an additional 25 689 government officials suspected of subsidy fraud. Of these: 634 government officials arrested 385 government officials found guilty and convicted R15.4m recovered through acknowledgement of debt

Subsidy fraud in provinces

AG ordered investigation into 6 974 municipal officials suspected of subsidy fraud. Of these: 346 municipal officials arrested 151 officials found guilty 76 cases still pending R7m recovered through acknowledgement of debt

Subsidy fraud in municipalities

Since its investigations began in 2007, SIU has: Recovered R44m from provincial and municipal

officials, which goes back into the human settlements grants for service delivery.

R11m has already been paid back into state coffers

Arrested 1 910 government officials who were unlawful beneficiaries of housing subsidies

Successfully prosecuted 1 297 of these Prepared disciplinary files against another 1 297

officials

Summary of subsidy fraud probe

National Audit Task Team investigations

1. Probe into housing syndicates

2. Probe into dodgy contractors

3. Complaints about NHBRC

Increasing concern at activities of housing syndicates

Several investigations now underway into syndicates selling and renting state-owned houses

These are primarily operating in Gauteng, North-West and KwaZulu Natal

Three arrests have already been made in KZN and suspects are currently in court. More arrests are expected in other provinces in the next 6 weeks

1. Probe into housing syndicates

10 246 housing projects have been assessed

SIU visited all nine provinces to get understanding of processes and provide high-level overview of all projects

Top ten ‘dodgy’ contracts in each province were identified

Further investigation narrowed these down to 20, with a total value of R2bn

Investigators hard at work investigating blockages in the contract value chain

2. Probe into dodgy contractors

A conveyancing attorney in KZN has been charged with 142 counts of fraud and theft

2 criminal cases have been registered with SAPS for fraud in respect of a contractor and engineer who defrauded the department of more than R10m

The process of restriction in respect of more than 40 contractors is in an advanced stage

Defaulting contractors will be placed on Restriction Database once process is complete

Progress to date

Identify blockage points in contract value chain to:

Ensure specific performance by contractors Set aside contracts and recover payments to date Address improper conduct emanating from such non-

delivery

Potential legal outcomes may include: Claiming damages from parties in default Facilitate criminal action including colluding parties Recommending disciplinary action against implicated

government officials Ensure removal of contractors from department’s database

Potential outcomes of Task Team

Complaints have been raised about the National Home Builders’ Registration Council

Complaints have come from the public, from Parliament and from political parties

These complaints have been forwarded to the SIU for investigation, and a report is expected

3. Complaints about NHBRC

Conclusion

The crackdown continues

We are putting increased resources into investigating all those who abuse the system – government officials, public representatives or contractors

DHS in process of closing systemic gaps identified by SIU to prevent future abuse of low-income housing subsidy scheme

Excellent progress has been made in cracking down on corrupt officials who have abused housing subsidies

The crackdown continues

The focus now is threefold: Housing syndicates Dodgy contractors Fraudulent subsidies

In doing so, the mandate of the National Audit Task Team, and the SIU in particular, is clear: investigate, arrest and charge those who are guilty of wrongdoing -- without fear or favour

No fear or favour