E Cape welfare in dodgy R128m deal

Irregular spending over 5 years now stands at R5bn

AFIVE-YEAR contract worth R128-million between the Eastern Cape social development department and a service provider has been found to be irregular.

The contract to manage the newly constructed Burgersdorp Child and Youth Care Centre contributed to the province’s total of R1.3billion irregular expenditure in the provincial auditor-general’s report 2016-17 financial year.

The figure has increased from R1.2-billion in 2015-16, with AG Sithembele Pieters’ office saying the main irregular spenders this year were education and roads and public works departments.

The total accumulated balance of irregular expenditure “not dealt with” in the past five years now stands at almost R5-billion, according to the AG.

In a report recently tabled before Bhisho legislature’s standing committee on public accounts (Scopa) by Pieters’s office, it was revealed that, since the Burgersdorp Child and Youth Care Centre opened its doors on March 1, an amount of R11.4-million had already been paid by the department to the company.

The company cannot be named as it could not be reached for comment by the time of writing.

The AG’s report states that the money was paid for “software start-up costs, security services and other costs associated with providing the management of the facility”.

The facility, which is meant to house 60 minor children in conflict with the law, only had two inmates at the time of AG’s assessment visit in June.

But addressing the Bhisho legislature house recently, social development MEC Nancy Sihlwayi said there were currently 12 underage inmates at the centre. They are serving time for murder, attempted murder, rape and assault.

The AG said the R128-million contract was irregular because the service provider had not been recommended by the department’s bid adjudication committee or the provincial one.

“The department’s superintendent[Stanley Khanyile who has since resigned and could not be reached] used his discretion to appoint the service provider against advice of these two evaluation committees.

“Hence all payments made so far in terms of the contract are therefore irregular,” stated the AG.

In the report, Pieters said the original payments made to the company were allocated as transfers and subsidies in the department’s latest annual financial statements.

“However, based on the nature of this contract and the services the department is receiving, this should have been classified as goods and services.

“By disguising this payment as a transfer payment, the accounting officer circumvented the required competitive bidding process,” the report noted.

The facility was constructed at a value of just under R50-million.

However, the AG said there was no feasibility study conducted before construction, no needs analysis performed and that there was “inadequate” coordination with other departments.

He said this impacted on the construction and management of the facility. “During construction the project was not properly managed and supervised.

“The original contractor on the project had to be replaced after 50% of the work was done and paid for. This resulted in increased costs of approximately R3.6-million,” the AG revealed.

● In his report the AG said the main contributors to the latest provincial irregular expenditure were the education department which irregularly blew R784-million in the year under review.

Following closely is the roads and public works department which incurred R341-million irregular expenditure, transport with R40-million, social development at R39-million and health department at R27-million.

“There is a scope limitation on the department of education’s irregular expenditure, as a result the value above may be understat the AG said.

He said accumulated in the past five years, irregular expenditure that the provincial government needed “to deal with” amounted to R4.9-billion.