Improved governance needed on COVID-19 initiatives

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The first audit report into government’s key COVID-19 initiatives has highlighted the need for better oversight

In his first audit report into government's key Coronavirus (COVID-19) initiatives and their funds, Auditor-General Kimi Makwetu has called on leaders to improve governance.

Makwetu says government's R500 billion COVID-19 relief package, which was funded by reprioritising the 2020/21 budget and securing loans,“landed in a weak control environment”.

He recently released the first in a series of audit reports, covering R68.9 billion (47 percent) of the initial R147.4 billion spending.

“Emergency responses and quick actions are required to save lives and livelihoods, but the easing of controls and the streamlining of processes and procedures to respond to the crisis expose government to the risks of the misuse or abuse of public resources.

“We have been reporting on and warning about poor financial management controls, a disregard for supply chain management legislation, an inability to effectively manage projects and a lack of accountability in many of the government sectors that now need to lead or support the government's efforts,” said Makwetu.

The COVID-19 audit is being performed by multidisciplinary teams, made up of fraud, information technology (IT) and sector-specific experts.

“We are auditing payments, procurement and delivery, as they occur, and are reporting any findings to the accounting officer or authority to enable them to deal with any shortcomings immediately and tighten controls to prevent a recurrence,” he explained.

Indicators of potential fraud

Makwetu said that IT systems used in government are not agile enough to respond to the changes required.

“The lack of validation,

integration and sharing of data across government platforms resulted in people – including government officials – receiving benefits and grants they were not entitled to. Some applicants could have been unfairly rejected as a result of outdated information on which assessment for eligibility was based.”

He also noted that pre-existing deficiencies in government's supply chain processes were amplified by the introduction of emergency procurement processes allowed for personal protective equipment (PPE).“There are clear signs of overpricing, unfair processes, potential fraud and supply chain management legislation being sidestepped.”

“We are concerned about the indicators of high-risk fraud and abuse we observed – not only in the areas that we were able to audit, but also where information for auditing was not forthcoming, which could be a deliberate tactic to frustrate our audit efforts,” Makwetu said.

The list of cases pointing to a high risk of fraud will be handed to the multi-agency Fusion Centre for swift follow-up and action.

UIF and social grants

By 31 July, the Unemployment Insurance Fund (UIF) had paid just over R37 billion from the UIF Temporary Employer/ Employee Relief Scheme (TERS) benefit, and the South African Social Security Agency (SASSA) had paid R19.6 billion in social grants.

While information technology systems across government carry data on almost everyone in the country, it is not integrated, shared across government or effectively used by the UIF and SASSA (and similar entities) to check if people qualify for UIF or grants, Makwetu said.

The UIF and SASSA made significant changes in their processes and systems, in a short time period, to enable payouts, without ensuring that good preventative controls were in place. “All of this increased the risk of payments to beneficiaries who are not eligible, overpayments, underpayments, the invalid rejection of beneficiaries, fraud and double-dipping.”

He explained that the new system implemented for TERS incorrectly calculated benefits for the first lockdown period (27 March to 30 April), by not taking into account the actual period of inactivity and the portion of the salary paid by employers, resulting in significant overpayments.

A high number of payments requiring investigation have been flagged.“Work is continuing to verify this. These include payments to people who are below the legal age of employment, deceased, working in government, receiving social grants or students funded by the National Student Financial Aid Scheme.”

The recalculation of claims and reconciliations with payment data also identified overpayments, underpayments, duplicate payments and discrepancies.“The UIF is implementing actions to address what we have reported,” Makwetu said.

There is a risk that the R350 Social Relief of Distress grant is being paid to people who are not in distress.“SASSA used some government databases to check if applicants have alternate sources of income, which would disqualify them for social relief grant.The databases are not sufficient, as our data analytics still flagged payments to over 30 000 beneficiaries that require further investigation.”

These include payments to government officials and to people who received other sources of income.

Procurement of PPE

The PPE procurement audit focused on the health and education sectors, particularly on the processes undertaken to identify the need

for PPE, the procurement process, payments made and PPE delivered. “A worrying picture is emerging,” said Makwetu.

Key findings include delays in PPE; unreliable methods for determining the number of employees and learners; support staff not always being considered; shortages in health facilities; PPE priced at double or five times the prescribed price; deficiencies and non-compliance in PPE procurement processes; and insufficient controls to ensure the receipt and payment of PPE at the levels of quality and price ordered.

“There are clear indicators of fraudulent activities in the procurement processes, which will be further investigated,” he added.

Other highlights of the report include:

• The uptake of the Spaza Shop Support Scheme was below expectations, with only 1 697 owners receiving the grant (R5.9 million) by 30 June,

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• against a budget of R175 million. Inadequate record keeping and reconciliations of vouchers approved, distributed and redeemed, was identified in the relief scheme for smallscale farmers.

The distribution of food parcels by SASSA could have been significantly cheaper if it used existing nonprofit organisations rather than appointing service providers. Food parcel distribution controls were not always effective, resulting in increased time from application to distribution, damaged and poorly packaged parcels and beneficiaries receiving more than they were entitled to.

The water supply initiative is behind schedule and the department could not provide a reliable listing of all water tanks delivered and their location.

The R410 million pledged by the Unites

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States Government for South Africa's health response has not yet been received. Of the 1 000 ventilators pledged, only 150 were received by 6 July. The availability of ventilators in the market remains a problem, with 1 144 ventilators ordered but only 58 delivered by 31 July.

By 31 July, only 510 quarantine sites out of 6 123 were identified and only 192 were activated for use.

Only 18 of 66 field hospitals were completed by 30 June.

Makwetu said to date, less than half of the appropriated funds have been spent, which suggested that a heightened level of oversight will be required as more programmes are rolled out.

“We call on oversight structures to use this report to direct their oversight actions and call accounting officers, authorities and executive authorities to account for the implementation of the initiatives related to the pandemic and the management of the funds entrusted to them,” he added.