CIFAL DURBAN

Ekurhuleni Metropolitan Municipality(EMM) Case Study

Presentation by: Harold Chiloane

Table of Contents

Background EMM Anti Corruption Strategy EMM Investigation Unit EMM Fraud Hotline Challenges Experienced Business Integrity Framework (Way Forward) Concluding Remarks

Background The Ekurhuleni Metropolitan Municipality

(EMM) Anti Corruption Strategy was developed and adopted by Council in April 2009.

The principles of the Local government Anti Corruption Strategy were considered.

The Strategy was developed as a framework and a building process to effect a series of interrelated steps.

EMM – Anti Corruption StrategyThe implementation steps are: Development of a Anti Fraud and Corruption Policy Development of Code of Conduct:

o Set up of register of Declaration of gifts, interests etc o Set up register for permission to conduct other

business o Set up a register of third party transactions (MFMA

requirement)o Register of non payment municipal accounts by

officials and Councillors Information session about Corporate Governance

EMM – Anti Corruption Strategy Strengthening of EMM disciplinary processes; Review of the Loss Control Committee’s scope

and function; Promoting hotline within the EMM; Introducing employee screening before

appointment Defining the Municipal Public Accounts

Committee’s role.

EMM Investigation UnitWe have a dedicated team responsible for Forensic audits, accounting and fraud investigations, Management of a Disclosure Service (Fraud Hotline) and management requests.

AUDIT AREA HOURSForensic Audit, Accounting and Fraud Investigation 12 000 Disclosure Service 2 000 Management Requests 2 000 Loss Control 2 000 Public Service Commission (PSC) reports 1 000 Disciplinary support etc 4 000 TOTAL 23 000

EMM Investigation UnitPlanned Capacity

Staff LevelAvailable

hours

Expected productivity

(%)

Expected productivity

(Hours) Employees

Total Productive

HoursManager 2 032 67% 1 361 1 1 361Supervisors 2 032 70% 1 422 2 2 845Internal Auditors 2 032 70% 1 422 8 11 379

11 15 585Total

EMM Investigation Unit

The following are the statistics of management requests, EMM Hotline and National Hotline received over the past five financial years:Financial Year Management

RequestEMM Hotline National Hotline

2007/2008: 45

2008/2009: 52

2009/2010: 58 18 1

2010/2011: 79 122 6

2011/2012: 42 110 7

EMM Investigation UnitSUCCESSESThe unit has investigated over 230 cases since 2007 involving allegations relating to the following irregularities: Unauthorised, Irregular and fruitless & wasteful

expenditure. Fraud & Corruption, Misconduct of staff and suppliers and Non Compliance to peremptory requirements of

various Acts and regulations, policies and procedures.

EMM Investigation UnitThe problems that are prevalent in the EMM are in the following areas:

Lack of Good Governance o Weak administration due to failure to adhere to Council

Resolutions, existing policies and legislation, inadequate administration, finance, HR & IT policies

Procurement processes o not being followed in SCMo Irregular awarding of tenderso Collusiono Conflict of interests

Financial Mismanagemento Payments made for service that have not been rendered

Service Deliveryo Failure to ensure that goods and/or service are delivered (no

monitoring)

EMM Investigation Unit We have established a working relations with agencies

like SIU and the Hawks There are a couple of high profile cases that the SIU is

assisting us with. The Hawks has recently arrested two former senior

officials and a local business man for tender fraud amounting to a R32 million. More successes in this regard are imminent.

AFU confiscated 8 properties, 27 luxury vehicles and 14 trucks.

There are some employees that were disciplined and found guilty of fraud and misconduct.

Fraud Hotline The approved EMM Anti-Corruption strategy makes

provision for the development and implementation of whistle blowing mechanism.

The service was established and it has been provided independently.

The Services are provided by BE HEARD - an independent service provider.

Fraud Hotline Enables stakeholders (employees, customers and

suppliers) to report unlawful and inappropriate activities anonymously and confidentially

Operates 24-hours a day 7 days a week Calls are answered in most of the official languages Each matter reported is given a reference number

and can follow up reports All calls are recorded and stored on a database Reports are sent to a designated person

Fraud Hotline

Contact channels FreeCall - 0800-102-201 E-mail – ekurhuleni@beheard.co.za Website – www.beheard.co.za MaxiCall fax – 0861-BEHEARD

Fraud Hotline

Fraud HotlineINTERNAL EMPLOYEE AWARENESS Launch November 2010 Information Pack with whistle, pamphlet and cell phone

sticker Laminated Posters on notice boards Ekurhuleni TODAY Electronic Bulletin Dedicated Page in the Corporate Internal Newsletter Place number on Ekurhuleni 2011 desk calendars Induction Welcome Pack – Include information Competition amongst employees to name the fraud character

(orange character) - Previous character was known as “Franky Fraud”

Fraud HotlineEXTERNAL COMMUNITY & CUSTOMER AWARENESS Launch at January 2011 Council Meeting Stickers reflecting number to be placed in municipal

accounts External newsletters Inclusion of the number in all educational material Ekurhuleni Website Place number on all external publications where applicable Perspex display holders for all Rates Hall & Licensing

enquiry desks. Flyers / Pamphlets

Fraud HotlineMARKETING E-Mail Signatures Corporate Stationary Templates to display

number Intranet and internet Strong Radio Campaign Pull-up Banners Promotional Items –Media Launch Billboards (2011 / 2012 Financial Year)

Fraud HotlineSERVICE STATISTIC Since the launch of the fraud hotline in 2010 have

received about 250 reports. The nature of incidents reported are:

o Theft and Tender Fraudo Complaints about call centre number not workingo Complaints about manager treating employees badlyo Unethical behaviouro Officers soliciting bribeso Illegal electricity connections

We are now experiencing backlogs in dealing with matters report.

Challenges Experienced Integration and coordination of Anti Corruption Strategies

(ACS) activities is challenge. Lack of monitoring and evaluation mechanisms Consultation process during the development of ACS was not

adequate Investigated matter are not processed on time:o Disciplinary caseso Prosecutionso Civil Litigation

Case management capacity due high volume of reported cases

Lack of Reporting of success stories.

Business Integrity framework EMM is currently developing a Governance

framework which include the development of the Business Integrity Framework.

The focus will be on the design of proactive measures to:o Identify fraud and corruption riskso Identify system weaknesses, and o How such areas should be managed proactively.

Business Integrity framework Elements that will be incorporated into the Business

Integrity Framework: o Fraud and Corruption Risk Management policy, o Fraud and Corruption prevention plan,o Fraud and Corruption response plan o Alignment to Local Government Anti Corruption Strategyo Other aspects of good corporate governance, ethics and

King III requirements. The diagram below depicts the process and gives

clear and concise visual aid to understand the aspects to be covered in the Business Integrity Framework.

Business Integrity framework

Concluding Remarks

Take aggressive action when fraud is discovered. Take action on people that do not act when fraud is

discovered Impose stiff penalties “thorough prosecution send a

strong message to employees” Need to raise awareness about the costs of corruption

for the country's political and economic development Create anti corruption agencies that will monitor state

organs on how the manage deal with fraud and corruption when it occures

Questions ?