siu presentation to portfolio committee: justice and constitutional development 12 october 2011

SIU Presentation SIU Presentation toto

Portfolio Committee: Portfolio Committee: Justice and Constitutional Development Justice and Constitutional Development

12 October 201112 October 2011

12 October 2011 1SIU presentation to PC on Justice and Constitutional Development

Summary

1. Introduction to SIU, mandate and legal scope

2. Strategy Overview

3. Building capacity

4. Participation with other government initiatives

5. Overview of performance

6. Operational summary

7. Challenges in dealing with corruption

8. Budget growth and project income

9. Funding issues

10. Financial information, audit and MTEF

11. Conclusion

Corruption hurts the poor disproportionately by diverting funds intended for development, undermining a government’s ability to provide basic services, feeding

inequality and injustice, and discouraging foreign investment and aid

Kofi Anan – previous Secretary-General of the United Nations12 October 2011 2SIU presentation to PC on Justice and Constitutional Development

• Started out: Heath Commission of Enquiry, 1995• Established: in terms of the Special Investigating Unit (SIU) Act 74 of 1996

– still function much like commission of enquiry – current SIU established by Proclamation R118 of 2001

• Investigations mandated: by a Proclamation from President• Powers: (similar to commission of enquiry)

– subpoena, search and seizure, interrogate witnesses under oath – innovation: power to use institute civil litigation to recover monies lost– not power of arrest, prosecution – can assist and facilitate – not power to take disciplinary action – recommend and assist • separate from law enforcement agencies but work closely together

• Major functions:

– investigate corruption and maladministration (ie not just crime)– institute civil legal action to correct any wrongdoing

3

SIU mandate and legal scope

About the SIU

• Facilitate and assist with concrete legal outcomes to investigations – ie:– criminal (prosecutions) working with the Police (SAPS) and the National

Prosecuting Authority (NPA)– civil litigation to recover losses – disciplinary action

• Capacity: massive expansion and development of multi-disciplinary forensic capability consisting of: – forensic investigators, lawyers and accountants – cyber forensic and data analysis experts and – project management capacity

• Mixed funding model: – baseline funding from National Treasury allocation - not sufficient– additional funding secured through partnerships with state institutions– goal is to build capacity in state and reduce reliance on the private sector


About the SIU cont...

• Cooperation: developed close working relationships with: – law enforcement: SAPS (especially the Hawks), NPA– Treasury bodies: Accountant-General, SARS, Financial Intelligence Centre– oversight bodies: Auditor-General, Public Service and Administration (DPSA)– Legislatures: Public Accounts Committees – national, provincial, municipal – chapter 9 institutions: esp Public Protector – individual departments, provinces and other state institutions

• Focus areas:

– large scale fraud and corruption where multiple small cases • social grants, housing subsidies, driving licences

– increasing focus on procurement related fraud and corruption– assist with improving systems and processes to prevent corruption – use of data to indentify potential irregularities pro-actively

5SIU presentation to PC on Justice and Constitutional Development12 October 2011

Vision: • Working together to rid society of corruption

Mission:

• We are a state body that fights corruption through quality investigations and litigation

Values:

• integrity, cooperation, professionalism, drive and effectiveness

Strategic goal: • To contribute to the reduction of corruption and the perceptions of corruption• The SIU aims to make this contribution as part of the broader anti-corruption

strategy of government

12 October 2011SIU presentation to PC on Justice and

Constitutional Development6

SIU strategy framework

Outcome 3: All people in South Africa are and feel safe

• Output 3: Corruption eradicated, including bribery, by officials within the JCPS as one of the major contributors of ongoing criminal activity as well as lack of trust and confidence in the system by the community – Compile a baseline report with detailed data for the 2009/10 financial year

• Output 5: Investor perception trust and willingness to invest in South Africa is improved and by taking corruption related action in a defined number of highly visible cases– Successfully convict 100 people who have assets of more than R5 million

obtained through illicit meansOutcome 12: Efficient, effective and development oriented public service and an

empowered, fair and inclusive citizenship

• Output 4 – Corruption tackled effectively.– An improvement in the TI corruption index from position 55 of 180 to 40 of 180.

12 October 2011SIU presentation to PC on Justice and

Constitutional Development7

Links to government outcomes

Externally focused

1. To increase impact of the SIU’s forensic services in the public sector2. To achieve optimum institutional form3. To ensure excellent cooperation with our law enforcement partners and

stakeholders

Impact

• Strengthen our strategic partnerships • Increase the scope of operations for the SIU• Contribute directly to

– Outcome 3: South Africans are and feel safe– Outcome 12: Efficient, effective and development oriented state

12 October 2011 SIU presentation to PC on Justice and Constitutional Development 8

Strategic objectives

Internally focused

1. To secure appropriate capacity and funding2. To align and improve systems and processes3. To invest in appropriate technology capacity4. To build an engaged, diverse and competent SIU5. To develop effective, accountable and engaging leadership

Impact

• Enables the SIU to achieve its external objectives


Strategic objectives

Strategic Overview – 3 years

2009/10

• Environment uncertain with recession and large dependence on partner funding • Concluded most of an intensive organisational assessment and design process to

better capacitate the SIU• Adopted a 3 to 5 year approach to strategic planning• Key focus on positioning the SIU as the forensic service provider to the state

– and increasing projects and funding 2010/11

• SIU became part of new government initiatives on corruption – ACTT, MAWG, DPSA– significant increase in impact, workload and funding– focus of investigations shift to procurement

• Aligned strategic plan to the Results Based Management and Outcomes Management approach of government and developed a Logic Model linked to Outcome 3 (Outputs 3 & 5) and Outcome 12 (Output 4)

1012 October 2011 SIU presentation to PC on Justice and Constitutional Development

Building capacity through partnerships

• The major focus of the SIU has been to build more capacity in the state to deal with corruption investigations:• has grown from about 67 to 600 staff in 9 years • trainee investigator program has addressed EE challenges in the forensic field

• The new operating model is designed for scalability – will allow for rapid increase investigator numbers in response to the increased demand

• To bolster capacity have sourced additional investigators from the private sector• intended as short term intervention and skills transfer initiative• allow time to recruit and develop staff• cater for some of the uncertainty from our funding model

• Big recruitment drive and development initiatives to provide long term capacity that is sustainable and helps to bolster government’s overall capacity to ensure effective investigations


Capacity summary

• Establishment is 668 funded posts– expect to grow to 706 in next 3 years – about 40% is dependent on project funding which make permanent

employment risky– have tried to mitigate by using consultants, contract and temporary staff – recruitment drive is on going

• 441 full-time ops staff– 25 working full-time with ACTT – and 11 with Wasps

• Permanent posts filled decreased due to uncertainty about project funding– 594 in 2007/08 to 522 in 2010/11

• Challenges due to cumbersome process of salary approval on which implementing the new organisational structure depends


Capacity summary

• To address capacity issues and demands for new investigations

• SIU has negotiated an innovative agreement with the private sector to in-source forensic investigators– at a discount of about 50% of AG rates – thanks to cooperation from private sector

• Currently using about 135 forensic investigators from over 20 forensic firms


Promoting EE

• Promoting employment equity has been a challenge in the forensic industry traditionally dominated by white males from SAPS commercial branch

• Difficult to compete with private sector salaries • SIU started own trainee programme –nearly 300 new investigators over 6 years • Also a leadership development programme • Agreed on a new plan with EE committee setting ambitious targets• Still a challenge at senior management level, but it is a focus of current recruitment

and SIU has made good progress so far• Exco: currently 3 white male, 2 African male

– 1 African male soon as Portfolio Manager– headhunting 1 African female for Stakeholder Head

• Senior management in Operations and Business Support:– 6 African, 2 Coloured, 7 White

12 October 2011 SIU presentation to PC on Justice and Constitutional Development14

ACTT (Anti Corruption Task Team) in the Justice cluster• Task team set to fast-track high priority corruption investigations and prosecutions, and to co-

ordinate efforts with other bodies. • Consists of the Hawks, SIU, and NPA (including prosecutors and the AFU) - supported by SARS,

the FIC and the Accountant-General in Treasury• SIU has committed considerable resources to this process

MAWG (Multi Agency Working Group on procurement) in the Finance cluster• Deals with irregularities in the gov’t procurement system, focusing on closing systems gaps as

well as detecting and investigating irregularities• Comprising the AG, SARS, FIC, DPSA and SIU – supported by Hawks and NPA• SIU has played a significant part in the development of strategy and implementation

Wasps (Special Anti-Corruption Unit in DPSA) in the Governance cluster• Focus on the investigation and prosecution of disciplinary cases against senior public servants

involved in corruption ensuring effective action is taken.• It will work closely with departments • The SIU has committed to provide investigative and legal support

1512 October 2011

Participation in other initiatives

SIU presentation to PC on Justice and Constitutional Development

SIU performance overview

12 October 2011 16

07/08 08/09 09/10 10/11 11/12 12/13 13/14

Cash recoveries (Rm) R61m R72m R69m R74m R30m R35m R40m Savings for financial year (Rm) R301m R202m R12m R10 m R30m R35m R40mPrevention of future losses (Rm) R2 672m R4 917m R197m R185m R200m R210m R220mEvidence prepared for:

- criminal action 4 495 5 545 5 350 4 179 2 000 2 000 2 000

- other remedial actions (cancell driving licences, social grant,etc)

139 331 198 052 50 357 52 192 3 000 2 000 2 000

- disciplinary action 8 627 4 750 3 870 2 814 2 500 3 500 4 000 - civil litigation (acknowledgem of debt signed,etc)

9 696 11 177 9 843 7 654 2 500 3 500 4 000

Contributing to completed investigations for JCPS output 5

0 0 1 4 20 30 30

Value of procurement matters where irregularities found

n.a. n.a. n.a. n.a. R20bn R25bn R30bn

SIU presentation to PC on Justice and Constitutional Development

• A significant change in focus in service delivery: – from multiple small cases – to fewer complex, long term investigations into procurement.

• Essentially it will mean the SIU deals with fewer but more important cases • This coincides with the new focus of government on procurement irregularities

– Social grants: shift from removals of grants to procurement issues• There is still one significant removal possible but probably not this year

– Housing: shift from illegal subsidies to housing contracts– Transport: agreement on driving licences has not been renewed


Analysis of performance

Analysis of performance cont.

• Impact on performance as measured currently– Financial indicators will decrease in short term as it will take longer to deliver– Number indicators: will also decrease but not as significantly

• 2 new indicators to try to measure impact – contributing to completed investigations for JCPS output 5 – value of contracts where irregularities found

• Looking at internal indicators – value of contracts where potential irregularities identified – value of contracts under investigation– value of contracts where irregularities found – value of potential remedial action, eg cancellation of contracts


New Proclamations 2010/11


1. Department of Health: Gauteng Province

2. South African Social Security Agency

3. Extension to Housing Proclamation R.7 of 25 April 2007

4. Department of Arts and Culture

5. Department of Education: Eastern Cape Province

6. Department of Public Works

7. South African Police Service

8. Department of Public Works: KwaZulu-Natal Province

9. South African Broadcasting Corporation

10. Ikhala Further Education and Training College: Eastern Cape

11. Tshwane Metropolitan Municipality: Gauteng Province

12. Ekurhuleni Metropolitan Municipality: Gauteng Province

13. George Local Municipality: Western Cape Province

14. National Heritage Council (Department of Arts and Culture)

15. Stellenbosch Local Municipality: Western Cape Province

16. Amendment to Stellenbosch Proclamation

17. Oudtshoorn Local Municipality: Western Cape Province

18. Department of Rural Development and Land Reform

Operations summary

• 2 more since last FY: 1. Midvaal Local Municipality (20 May 2011)2. Former Department of Roads and Transport Eastern Cape (20 May 2011)

• Numerous additional requests for investigations and motivations for proclamations in process

• 60 current investigations• 22 active proclamations• Investigation growth areas include:

– Procurement– Public works– Rural development and land reform– Parastatals – Local government– Education and Health


Operations summary

Procurement contracts under investigation:

• 588 to the value of R9.1 billion

Conflict of interest matters under investigation:

• 360 to the value of R3.4 billion

Procurement investigations were irregularities were found:

• 43 to the value of R1.4 billion (April to June 2011)

Conflict of interest matters where irregularities were found:

• 45 to the value of R99 million (April to June 2011)


Operations

SAPS• Assistance to Public Protector in SAPS HO and Durban leases only part of a far wider

investigation requested by the ICD and current National Commissioner• A major concern was significant irregularities in the SAPS build programme with

allegations of SCM irregularities in the building and/or renovation of 33 police stations exceeding R330 million:– lowest quotations not accepted– no quotations from the winning bidder– possible cover quoting and BEE fronting– possible conflicts of interest - SAPS officials appear to have interests in the

suppliers awarded work for goods and services– actual payments exceeding budgeted costs

• Agreed priorities are the following building and/or renovation projects :– Pienaar, Hazyview, Brighton Beach, and eSikhawini police stations


Operations

Department of Public Works (DPW)• Looking at entire DPW function - a core state entity with significant vulnerabilities• At least R35m paid to entities where DPW staff have undeclared business interests• Contract for construction of accommodation at border post:

– value of contract is R374m – Investigating maladministration, financial misconduct and corruption on part of

senior DPW officials and contractor– Looking to civil recovery of about R46m as well as other action

• Pretoria lease agreement for residential accommodation: – at approx R217 000 pm without relevant approval– payments to date exceeds R7m – contractor has been positively linked to DPW official

• Priority matters currently under investigation: leased accommodation, specific contracts, conflicts of interest and general SCM irregularities – total: R3.3 billion


Arts and Culture• Looking at misuse of funds ring-fenced for 2010 Soccer World Cup (SWC)• Investigation revealed:

– R26m shifted from earmarked SWC budget – unauthorised expenditure– R16m not used for SWC-related projects - also unauthorised expenditure

• Reviewed 39 Investment in Culture projects: – recommended R8.3 million savings


Operations

SABC• SABC approached SIU for assistance• AG investigation which identified:

– 20 employees whose business interests – received payments totaling R 3.4m from 1 Oct 07 – 30 June 09 – 13 disciplinary cases recommended

• SIU has identified another – 20 employees whose business interests received payments amounting to R 2.4

billion in period 1 Sep 07 – 31 Mar 10– still under investigation

• Working jointly with the Brixton Commercial Crime Unit on 8 criminal matters– 5 matters have been finalised and are to be submitted to the NPA for a decision

by SAPS


Operations

Tshwane Metro• Identified 65 officials who have interests in companies doing business with the

Metro and receiving payments as active vendors– Total payments made to these businesses between 2007 and 2010 is R185m

• Total value of procurement under investigation in excess of R80m• Irregularities include:

– Deviation approvals of over R400m– Collusion between officials and service providers– Deviations from tender specifications without authorisation– Payments to service providers for work not complete or services not rendered


Operations

Ekurhuleni Metro• Waste management

– Reviewing 10 tenders involving 19 contractors – total value of contracts in excess of R500m– In 1 contract, payments of R37.8m made to service provider without delivery

notes – No-one at Metro can confirm whether goods were delivered

• ICT contracts

– Contract to value of R32 million awarded to company • with which Exec Director IT had an undisclosed relationship • He has since resigned and is now employed full-time by the company

– Director: Infrastructure admitted to signing off on invoices to value of R 12.4m for services that were not delivered


Operations

Rural Development and Land Reform• Proclamation, requested by the Minister, covers the following areas in the land

reform programme :– Application for and award of grants and funds and the administration thereof in

a manner that was contrary to legislation and guidelines, or fraudulent– Irregular expenditure; fruitless and wasteful expenditure; and/or expenditure

not due, owing and/or payable to beneficiaries, consultants, and/or service providers

• SIU’s biggest ever data uplifting project, involving over 50 million printed documents being identified, catalogued, scanned and analysed

• Have already worked with Hawks and AFU to:– 3 officials and a KZN businessman, on fraud and corruption charges relating to

the irregular awarding and administration of land reform grants totalling R50m– AFU has frozen several KZN farms and assets worth about R50m to date– Farms to the value of R36m already forfeited back to the state (this FY)


Operations

Operations

Department of Human Settlements• One of SIU’s longest running projects in cooperation with the National Department. • New focus is on construction contracts• A review of the Housing Subsidy System indicated at least 50% of all projects are

problematic in some way. Contractors paid for building houses which may– Not exist at all– Be extensively incomplete– Be seriously defective– Not correspond to the numbers agreed to (paid for building more houses than

was the case)• Currently focus on 20 projects for 2010/11 drawn from all provinces, identified in

cooperation with Department – 7 additional projects identified for 2011/2012

• Total value of contracts under investigation is over R2 billion


Operations

Department of Social Development / SASSA • One of SIU’s most consistently productive investigation• Headline statistics from June 2005 – February 2011• Beneficiary files collected 85 315• Cases brought before court 17 729

• Court cases finalised 16 623

• Convictions obtained 15 281• Total AoDs signed 40 146• Total value of AoDs signed R244 million• Savings on cancelled grants R898 million• Will no longer continue in this form, as result of a request by and lack of funds from

the Department and SASSA.


Challenges in dealing better with corruption

• PFMA and powers of Accounting Officers – control over investigation, disciplinary action, civil litigation, referral for criminal

action, recommendations not implemented• Another is the need for better coordination of the many new initiatives• Response to the Glenister judgement

– Ensure SA compliance with the UN Convention Against Corruption including the establishment of dedicated agency with sufficient safeguards around independence

– Need to locate appropriate over-all accountability for a consolidated assault against corruption including prevention and enforcement efforts

• Amendments to SIU Act – in Judicial Matters Amendment Act– Unable to use civil litigation effectively as envisaged in Act - deal with locus

standi and other issues – Delays have restricted impact of SIU


Budget growth and projects income

01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11R’m R’m R’m R’m R’m R’m R’m R’m R’m R’m

NT grant 21 23 26 37 49 56 103 116 155 171

Projects 0 0 15 22 53 83 129 132 114 142

Total 21 23 40 60 102 138 232 248 269 312

Projects as % of Total

0% 0% 37% 37% 52% 60% 55% 53% 42% 45%


• Huge overall growth in income from R21m in 2001/02 to R312m this year • Massive increase in funding from projects to 60% of total income, then decline• This year forecast to be about R240m (from R142 in 10/11)• SIU vulnerable when there is decline as during recession as many staff employed

Funding Issues

Background

• In past 7 years, SIU budget supplemented with project income through cooperation agreements with other state institutions

• For 2011/12, budgeted project income was R150 million• Such income has enabled the SIU to take on many more investigations

Possible legal problem

• Legal opinion received that SIU is not allowed to enter into such agreements – since SIU Act is silent on this issue

• Legal advice is that for this FY, SIU can continue to receive payments for work – provided that a proclamation exists and an agreement is already in place

• It can also renew such agreements that expire in current financial year• However, this is on condition of there being a process to regularise the situation

– through an amendment to the SIU ACT to allow for such funding


Funding Issues

Impact

• At present, SIU cannot to enter new cooperation agreements which involve funding• Was expecting to invoice an additional R90m this year

Possible solutions to situation

• Amendment to the SIU Act - a discussion has already taken place with the DOJ DG and amendments have been drafted for inclusion in Judicial Matters Amendment Bill

• NT with support from DOJ has agreed to additional funding of R97m for this FY– to compensate for loss of revenue and to take on additional work

• Additional funding for future years; SIU to request permanent increase in current budget to reduce reliance on funding from co-operation agreements

• SIU throughout this process has received excellent support and commitment from the Minister of Finance, NT, Minister of Justice and the DG of DOJ


Financial Information


R thousand

Audited outcome

Revised

estimate

Medium-term estimate

(current baseline)

Statement of Financial Performance 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 Revenue

Non-tax revenue 141 314 121 853 142 586 151 697 152 328 152 468 152 452

Sale of goods and services 131 622 114 120 141 151 150 259 150 803 150 852 150 852

Transfers received 116 297 154 737 171 089 193 620 202 810 218 504 231 614

Total revenue 257 611 276 590 313 675 345 317 355 138 370 972 384 066

Expenses .

Current expense 260 675 282 821 336 851 331 074 355 138 370 971 384 066

Compensation of employees 164 292 182 060 182 142 213 085 235 188 251 329 254 265

Goods and services 85 142 84 802 144 756 104 304 105 938 105 167 114 744

Depreciation 5 443 10 859 9 936 13 685 14 012 14 475 15 057

Other 5 799 5 099 17 – – – –

Total expenses 260 675 282 821 336 851 331 074 355 138 370 971 384 066

Surplus / (Deficit) (3 064) (6 231) (23 176) 14 243 – – –

Audit and MTEF

Audit outcomes

• Have received clean (unqualified) audits at all times since formed in 2001 • SIU is particularly proud of the fact that its last 6 audits have been unqualified and without

any emphases of matters

Funding for the SIU

• Grant received as transfer from the Department of Justice and Constitutional Development• Also revenue generated from charging institutions fees for some of its investigations

MTEF requests

• Have requested an additional R150m in funding over the next 3 years• To reduce reliance on projects funding • And to increase capacity to take on unfunded investigations • Some of the areas where SIU is most needed, at municipal level and some provinces

– it is in fact doing very little work • This will create an additional 200 positions over the MTEF period • Initial indication from NT that they will support request but still to be processed12 October 2011 36SIU presentation to PC on Justice and Constitutional Development

Analysis

Growth Trends

• Total Revenue: up 10.6 % pa from R237m to R314m (07/08 to 10/11):– projected to increase by 5.6% pa to R384m by 14/15 before baseline increases– After proposed baseline increases, revenue should grow at 18.7% pa to R549m by

14/15• Total Expenditure (excl Capex):

– increased 23.2 % pa, from R199m to R337m (07/08 to 10/11)– projected to increase by 3.5% pa to R384m by 14/15 before baseline increases– After proposed baseline increases, expenditure should grow at 15.8% pa to R549m

by 14/15Savings

• In past 2 years, aggressive savings: reducing accommodation & car rentals costs, limit telephone use and recovering all private call costs


Conclusion

• SIU has made considerably more impact in past 2 years • There is a massive increase in demand for assistance to address corruption from

government and state institutions • Capacity to deal effectively with investigations remain a challenge • Partnerships with other government institutions through initiatives like ACTT,

MAWG & Wasps have started to improve coordination


Questions & Discussion


siu presentation to portfolio committee: justice and constitutional development 12 october 2011

Documents

siu presentation

siu mandate

legal scopepresentation

corruption use

baseline funding

public service

sufficientadditional

forensic investigators