FREE STATE EDUCATION PARTNERSHIP WAS IRREGULAR
The Kagiso Shanduka Trust was awarded an irregular tender in the Free State for a rural education development and related infrastructure project that should have gone out for competitive bidding, leaving the provincial education department R500 million in the red.
The co-financing contract between the Kagiso Shanduka Trust and the Free State education department was intended to pilot an innovative model to address infrastructure development, curriculum support, social welfare and growing leadership in rural and township schools in the province. The trust is also associated with President Cyril Ramaphosa.
There was, however, no innovative element in the unsolicited bid by the partnership between the Kagiso Shanduka Trust and the Kagiso Shanduka Foundation that warranted a deviation from the procurement process, and other service providers could have easily provided the same work, found an investigative report by PwC in October last year.
The agreement was a matched funding partnership, in which the Kagiso Shanduka Trust contributed R200 million and the Free State education department contributed the same amount.
The investigators found that the state expenditure of R508 299 556 on the project – including the prepartnership deal in 2010, involving only the Kagiso Shanduka Trust – was irregular and recommended that further investigation be conducted to establish whether taxpayers had money in the deal before a request for condonation was submitted to the provincial treasury.
In a sample of 19 out of a total of 301 projects in which the investigators sought physical verification of the infrastructure built in the schools, some mediumto high-risk issues were identified, including significant cracks in walls, water leaks and substandard electricity connections, as well as amounts claimed for work that had apparently not been done.
With the provision that further investigation needed to be done, the investigators found that no person had committed wrongdoing. However, they also recommended that more projects valued at
R431 099 252 be scrutinised for other medium- to high-risk issues.
According to the report, “there was no information available to support the cost of repair or cost to correct defects … There was also no documentation supporting a decision by the department to enforce any recourse they may have under the 2010 or 2013 service level agreements to correct any of the identified repairs.”
Once the calculated loss has been established, the department is advised to approach the provincial treasury for condonation of the irregular expenditure. The request should include investigation into fraud, corruption or criminal acts; any criminal charges laid; any disciplinary action; and remedial action taken by the accounting authority.
The Kagiso Shanduka Trust said on Friday that, while it had not yet seen the PwC report and could not comment on its contents, Ramaphosa had not been involved in the infrastructure development operations.
“His involvement was limited to the Kagiso Shanduka Trust’s internal and external advisory boards, whose mandate was to offer strategic guidance on delivering the programme.
“The advisory board members hold no financial and operational responsibilities, and only receive reports on the strategic objectives of the programme and progress thereof from the board of trustees,” said Kaya Nyati, the trust’s manager of stakeholder relations and communications.
Asked how the contract had been concluded when the product or service did not comply with National Treasury’s requirements for unsolicited bids (including that the product or service involves an innovative design, an innovative approach to project development and management, and a new and cost-effective method of service delivery), Nyati said: “We engaged extensively with the legal representatives of the parties involved to ensure that the partnership agreements met the necessary legal and administrative requirements.
“The Free State government also provided legal inputs and oversight on the contract prior to the contract being signed. As part of the extensive legal consultations between the parties to the agreement, we were assured that, as an innovative project with government, the agreement could be entered into.”
Importantly, she added: “During the implementation of the partnership agreement, the Kagiso Shanduka Trust – as a nonprofit organisation – was independently audited annually and has received clean audits since 2014.”
Regarding the identified structural defects, Nyati would only say that the Kagiso Shanduka Trust had established management structures to ensure joint decision-making for programme implementation, including infrastructure delivery.
“The committee is constituted by officials from both the [education department] and the Kagiso Shanduka Trust. Their role is to provide quality assurance and ensure that any infrastructure defects are attended to. As practice, when we become aware of any challenges relating to infrastructure delivery, we ensure that these are remedied and that quality assurance is improved during the building process,” said Nyati.
In the 2013 to 2015 annual report of the Kagiso Shanduka Trust, Ramaphosa stated that the Free State programme was well aligned with government’s policies and focus areas.
“If collaborations like the Kagiso Shanduka Trust – which bring together the private sector, government, NGOs and school communities – are able to flourish, we will see true progress in our collective mission to secure a successful future for the young people of this country,” he said.
The Free State education department said it was experiencing unforeseen technical difficulties in responding to the media query, while the presidency said it was only on Friday evening that they had become aware of the questions sent to them by City Press on Thursday morning.
Free State treasury spokesperson Tshidiso Mokokoane said it had taken cognisance of the PwC report on the review of irregular expenditure.
“It should also be noted that the treasury provides monitoring and support to departments in ensuring that sound supply chain management practices are observed through key control matrix and key performance indicators,” he said.
Mokokoane said the provincial treasury had not yet been approached by the provincial education department for condonation of the Kagiso Shanduka Trust’s irregular expenditure.
“As per the results of the report, it was impossible
[Ramaphosa’s] involvement was limited to Kagiso Shanduka Trust’s internal and external advisory boards, whose mandate was to offer strategic guidance on delivering the programme. The advisory board members hold no financial and operational responsibilities and only receive reports on the strategic objectives of the programme and progress thereof from the board
to conclude whether a loss was incurred or not, and the department was advised to revisit the total population of projects before calculating such loss,” he said.
“Only once the department has finalised the further investigation and it has been confirmed that no loss was incurred in the contravention of legislation, and that value for money was achieved, can the accounting officer of the education authority refer the matter related to irregular expenditure to the provincial treasury to consider condonation of the mentioned irregular expenditure,” he explained.
Nyati said that, at the time of entering into the contract in 2013, the Kagiso Shanduka Trust had engaged extensively with the legal representatives of the parties involved to ensure that the partnership agreement met the necessary legal and administrative requirements. The trust had duly been assured that the agreement was entirely legitimate and could proceed.
The benefits of the programme, she said, had been positively realised over the years and could be observed in the improved pass rate and quality of matric results in the Free State.
“The sustainability of the programme’s interventions is evident in the results of Fezile Dabi as the highest-performing district in the country,” Nyati added.
“From 2013 to April last year, the Kagiso Shanduka Trust’s District Whole School Development Programme made a positive impact on the Fezile Dabi and Motheo districts in the Free State, including 240 project schools, the attendance of 251 schools at empowerment and transformation workshops and the indirect positive impact of these workshops on 399 673 pupils.
“In addition, 137 981 pupils underwent vision screening, 5 662 pairs of spectacles were donated to them, 334 new school facilities were built and another 284 were renovated, 1 575 temporary jobs were created and 261 small, micro and medium-sized enterprises were supported,” said Nyati.