SIU findings on matters relating to Human Settlements; DHS & HDA on progress made in implementing Audit Outcomes recommendations; with Deputy Minister

Meeting report

The Chairperson was late and the Committee selected Mr T Malatji (ANC) as Acting Chairperson.

Ms E Powell (DA) recommended a change to the agenda so that the Special Investigating Unit (SIU), the Department and Housing Development Agency (HDA) present first, and then the deliberations happen after.

Ms N Sihlwayi (ANC) agreed with the suggestion.

Mr Malatji reminded the Members to keep time in mind and be concise with their responses.

Special Investigating Unit on Housing matters

Adv Andy Mothibi, Head, SIU and Mr Leonard Lekgetho, Chief National Investigations Officer, SIU, delivered the presentation.

The SIU detailed its investigations under Proclamation No. R23 of 2020 the Procurement Process for Temporary Residence Areas by Limpopo HDA, Proclamation R39 of 2019 Free State Department of Human Settlements, Proclamation R23 of 2020 (PPE) Free State Department of Human Settlements, and Proclamation R22 of 2016 Lepelle Northern Water & Gauteng Department of Human Settlements. The investigations found instances of service and goods procurement that were not fair, equitable, transparent, or cost-effective. Corruption was committed by officials, and services providers hired by:

• Limpopo Provincial Department of Co-operative Governance, Human Settlements & Traditional Affairs and the Limpopo HDA
• Eastern Cape Department of Human Settlements and the Eastern Cape HDA (three matters)
• Buffalo City Metropolitan Municipality
• Mpumalanga Department of Human Settlements
• Free State Department of Human Settlements (two matters)
• Gauteng Department of Human Settlements.

The SIU found instances of corruption in which projects were paid for, or overcharged for, but were not completed or had never been built. In the case of the relocation of Talana Hostel and Burgersfort Ext.10, the company that was awarded the contract, Aventino, falsified their CVs, work history and qualifications and claimed to hire employees which they had not. Only 40 structures out of 192 were completely built. The contract was valued at R15 392 203.03 but only R2 577 640.00 has been paid. The investigation into the Mpumalanga Department of Human Settlements’ project to install water tanks in 247 schools revealed that a tank collapsed and killed a learner and that the tanks are not operational.

Most of the officials or service providers involved have been referred for disciplinary or criminal procedures. Some court cases have been opened. Referrals for disciplinary actions were made against all members of the Bid Evaluation Committee (BEC) and the Bid Adjudication Committee (BAC) for their failure to conduct due diligence and on 17 December 2020, the DPCI/HAWKS arrested the owner of Aventino on a charge of fraud. The SIU will follow up on all referrals made. 

The SIU has received new allegations of corruption against National HDA and the Free State Department of Human Settlement and investigations are underway.

 (Please see presentation for more details).

Additional remarks

Adv Mothibi said that all of the new allegations are under consideration and that they will be assessed speedily. The presentation indicates that there was a wanton disregard for procurement processes and regularities in all of the areas that they investigated. It is very clear that there was disregard for the procurement processes under the National State of Disaster. The State of Disaster did not entitle anyone to disregard the prescribed processes. There has been evidence that in some instances of this disregard, the intentions were to commit corruption and profiteer. In one provincial Health Department, a service provider had made a mark up of 833%. This is really unacceptable. The evidence also shows misrepresentations in various investigations, particularly in the Limpopo investigations. There is evidence of poor or incomplete service delivery and non-delivery. This indicates that someone in the Department should have made sure that there was delivery, but this did not happen. The SIU investigated this and that is why most of the referrals for disciplinary action point to those who should have acted on behalf of their conscience. For the service providers, there is both litigation and criminal action so that there can be consequence management.

For the Eastern Cape presentation, some terminology needed to be explained. In some areas, the municipality agreed to terminate the contract because of irregular spending. That is a quick way of ensuring that the municipality does not continue to have liabilities under that contract. There was also mention of Acknowledgement of Debt. In some instances, if service providers admit that they have been irregularly paid, then they sign this. It is an agreement to pay back the money. For the Eastern Cape investigation, the Bill of Quantities (BOQ) and the Quantity Surveyor (QS) were mentioned. The BOQ is done by the QS. It is a scientific investigation into the quantity of money that the Department has lost so that they can begin the recovery process. The asbestos matter is underway and the investigation is complete. The Hawks are involved and the NPA has now taken the investigation to court. The matter is also at the High Court for civil recoveries. If one looks at the Gauteng Human Settlement recovery process, which was instituted in 2018, there were delays in the High Court and the SIU started the processes which resulted in the President creating the Special Tribunal. The Tribunal has been hugely beneficial and has avoided any delays. However, it has still been four years and the recovery process has not been quick. The delay in the High Court was because they were joined by other litigants. The Special Tribunal deals mainly with the investigations that are done by the SIU.

Discussion

Mr Malatji said that the Committee had made a mistake in changing the agenda. The Department and the SIU presentations should be separated.

Ms Powell said that the amendment made to the agenda was to join the deliberations after the presentations were given.

Ms Sihlwayi said that on second thought, the SIU is an external institution and the second presentation is an internal debate of the Department. It makes sense to separate the two. She can imagine when a mistake has been acknowledged that it will be accepted as such. She agreed with Mr Malatji.

Adv M Masutha (ANC) agreed that the second matter is internal and that the Committee should deal with the SIU first and then let them go. He was the Executive Head of the Justice Portfolio for five years and had first-hand experience with the SIU.

There is a re-occurrence of gross transactions in Human Settlements in all three spheres of government. The issue of accountability is hampered because the national government has no authority to take action in the other two spheres. There is a disjuncture there in the sense that, for example, a municipality can choose not to take action against its own Councillors. In other spheres, procurement is done by officials. But at the local government level, this is done by Councillors. The issue with this is that Councillors then get burdened by all kinds of small cases and sundry. Is there an alternative way to manage the volume of duties that the Councillors are dealing with? This would ensure that impunity does not persist purely on the basis that it is not possible to round up all the thousands of transgressions all the way down to the hundreds of municipalities where these issues take place. What is the advantage of this?

Ms Powell said that the Committee has already adopted an agenda and that if they are going to amend it then it needs to be tabled again. She asked if they could follow process.

Mr Malatji said that there is a consensus on this issue. He asked if she wanted to table the agenda again.

Ms Powell said that one speaker suggested an amendment but, it was not a consensus. She is concerned because some of the submissions that she has to make are for both the SIU and HDA together. If they decide to amend the agenda, then can the SIU remain for the HDA’s presentation?

Ms Sihlwayi said the issue raised by Ms Powell makes sense now that she has explained her reasons. However, they should not imprison the SIU because of the HDA’s presentation which they did not prepare for. She can imagine that the Department is knowledgeable and is able to answer the questions on its own. The SIU has other duties to do. The Department has a responsibility to work on issues independently of external entities. She agrees with the second amendment.

Adv Masutha said that the SIU only acts on Proclamations. Any questions that Ms Powell wants to ask have to arise out of the Proclamations made by the President and issued to the SIU. Unless the Department falls under a Proclamation, then the SIU can’t be expected to comment on it. That would be outside of their mandate.

Ms C Seoposengwe (ANC) says that they are not in court. The SIU is there to give them an update on its investigations. If they are not happy with the Department and the HDA then it’s something that can be taken further. These matters are in the courts and under investigation, so the information will come later once the court processes are done. If there are any further questions that Ms Powell has, she can refer them to the Department or the SIU at another time. These sessions are recorded and shared with the public. The SIU should be released as they have more work to do.

Ms Sihlwayi wished that the Department is really listening to the unethical conduct that is done by the administration. The Department appoints people to do work for it and cannot abdicate their responsibility; they need to oversee to ensure that the work is done well. The issue is that the Department has appointed an implementing structure, which is the HDA. Does the Department believe that the HDA has all the tools and is well structured enough to do what it needs to do? The entity is meant to follow the principles of project management and the Department should be ensuring that this is happening. How can there be so many irregularities and corrupt activities by contractors to steal money from the people of this country? The issue of accountability and protecting our people solely resides in the administration. Where in the Department are those to ensure this accountability and protection? The issues raised by Adv Masutha, that the National Department has nothing to do with how local and provincial governments behave, makes her afraid. Particularly with the money that is sent to these spheres of government for housing and how National cannot take them to task for any wrongs that have happened. She needed clarity on this issue. How did the HDA and local and provincial governments misuse the money of the National Department, and cannot be taken to task for it? This shows how bad the government is in terms of the utilisation of community funds.

Ms S Mokgotho (EFF) asked if the SIU is going to recommend that consequence management be applied to the officials who failed to do timeous, continuous monitoring of the provinces and who disregarded prescribed procurement processes. The Committee has long advised the Department to empower the HDA to do their work properly. The Department promised that they were going to do so. If the Department has done this, then there is still irregular expenditure due to them not doing their work effectively. Why did the Department not take the HDA to task?

Ms Powell said that the reason the HDA is a mess and is full of corruption is because of the failure of the Committee to genuinely do its work and to engage in rigorous oversight as per the Constitution. The earlier decision to release the SIU, even though they have set time aside to join the meeting and brief the Committee, and the desperate manner in which some members pushed for this, is indicative of that failure.

The SIU is remarkable and acts with speed and professionalism. It is world-class and stands out in South Africa, especially since so many of our oversight structures and police systems are broken. On the issue of civil recoveries, can the SIU outline how it goes about recovering the money, especially when the contractors ‘go bust’ as a result of their contracts being halted? What is the SIU’s view on the internal Condonation Committee of the HDA not finding any evidence of the fraud that has been detailed by the external auditor for the financial year in which much of the corruption outlined in the SIU report took place? Would the SIU consider reviewing the findings of the HDA and the corruption that its internal committees may have missed? If so, would this require a new Proclamation? She is concerned that the HDA is not being audited by the Auditor-General and that the internal committees do not have the requisite financial audit skills.

Mr B Herron (GOOD) asked if Proclamation R23 of 2020 is still active and if it applies to de-densification during the pandemic. Out of 29 projects, 10 or 14 have not been completed, but the SIU has only reported five or six. Is this Proclamation applicable to these unreported projects that have not been completed?

Mr Malatji asked how the SIU is dealing with the advanced payment issue in the Free State, and its take on the matter raised in the Zondo Commission implicating the Department.

Adv Mothibi said that the entity’s mandate is to investigate state-owned entities. When the SIU investigates a particular state institution and irregularities are found, they look for evidence as to who is accountable or responsible. If it is a procurement issue, which it is most of the time, then the report will take the reader through what the investigators looked at such as the procurement documents. That is how they were able to point to the BEC members and move up the chain of responsibility from there. When it comes to projects at the provincial level, it is a similar process. For example, if the HDA conducts projects in the provinces, then an inquiry is made into the extent to which the HDA would have delegated. The legal position on delegation is that it does exonerate the person who is responsible for the delegation, and the HDA would be responsible for any irregularities. The principles of accountability point to a specific process in a state institution. The accountability and follow-through of the SIU’s referrals remain a concern, particularly for disciplinary action. There is a further process to monitor the implementation of the SIU referrals at a Presidency level. Any referrals that have not been acted on will then be revealed and actions taken. There is a concerted effort at the Presidency level to help ensure accountability. The presentation indicated a number of findings against officials, such as six officials in Limpopo. Referrals for disciplinary action have already been made. They need to ensure that they follow up and that the officials are held accountable.

When the SIU finds that there are irregularities, it then begins the process to implement civil litigation. The information and evidence are prepared, external legal counsel is appointed through the State Attorney, and the legal counsel takes the case to the Special Tribunal. The Department or Municipality is a core applicant so that they can be a part of counsel in these contracts and recovery. The other parties that are cited as respondents are the service providers and their directors. This ensures that there is a chance of recovering the money when the companies ‘go bust’ or are liquidated. Sometimes, companies are blacklisted and will liquidate but their directors will end up at another company. This defeats the purpose. This is why they target the directors as well. Preservation orders are also done during the civil litigation process. A financial analysis will be done of an individual or a company and where there is a legal basis, the assets will be preserved so that money recovery is possible.

In terms of the HDA’s internal committee that Ms Powell referred to, the SIU would first have to do its own investigation into what the functions of the committee are and what they have condoned. If they have condoned on any matter that falls under a current Proclamation, they will be able to look at it. Often these committees are created by Accounting Officers and assist them in making decisions. Ultimately it remains the decision of the Accounting Officer. It can be submitted for review by the SIU. If it has a legal basis and falls under a Proclamation, then they should be able to act on it. If it falls outside of a Proclamation, then they will amend it. This is signed off by the President.

The report on Proclamation R23 of 2020 has been submitted to the President, but the report states that if there are new allegations that come up, the SIU is legally enabled to investigate them.

The SIU has an Internal Governance Committee which interacted with the Zondo Commission on various issues. They are going through the reports from the Commission meticulously and if any recommendations fall under a Proclamation, they will be able to implement those recommendations. He does not have enough information on the advanced payment issue in the Free State and does not wish to mislead the Committee.

Ms Simangele Tshabalala, Free State Head, SIU, said that she did not have enough information either. She will speak to the head of the investigation and let the Committee know in writing.

Ms Sihlwayi asked what the national government’s inability to control provincial and local government meant for the SIU. Is the SIU able to give a clear recommendation to the government about how to avoid this quagmire? Is it in the mandate?

Adv Mothibi said that the HDA is an agency of the Department. The Department is responsible for the HDA doing its work properly and there should be proper witnessing and reporting mechanisms. The SIU is able to recommend to the Department when it has discovered weaknesses in the system. The assumption is that the HDA would have a legal instrument that regulates its service to the provinces and there has to be an agreement between the Department and the HDA for it to execute projects. The HDA should then be monitored accordingly. If the execution is substandard, then the HDA and the Department should monitor this and implement changes. The SIU checks the legal framework and the procedures that have been put in place to monitor the project.

Presentation on the Status of External Audit Action Plans, 2020/21

Deputy Minister Pam Tshwete said that the HDA has come a long way over the past few months and that things are looking up. The entity is much more stable and is working tirelessly to improve efficiency. The process to appoint the CEO and the CFO has gone through Cabinet. The external audit found that the HDA had weak internal controls in supply chain management and project financing. The entity has been working hard to implement the recommended changes and make sure that the findings do not reoccur. To date, 86% of the audit findings have been resolved and this includes all supply chain findings and strict controls have been implemented. To manage irregular expenditure, the entity has established a Condonation Committee. Among other duties, it will facilitate and advise on action deemed appropriate and will look at individual cases based on merit. The committee will also check if everything is recovered. The findings that have not been implemented are those concerning the creditors with debit balances incorrectly classified as payables. There is a pending investigation into these inconsistencies. It will be resolved soon.

Presentation

Mr Mbulelo Tshangana, Director-General of the Department of Human Settlements, Dr Tshilidzi Ratshitanga, HDA Chairperson, and Ms Daphney Ngoasheng, HDA Acting CEO, gave the presentation.

The HDA obtained a qualified audit opinion for the 2020/21 financial year due to material misstatement identified during the external audit.

All findings relating to Supply Chain Management have been resolved. HDA has established an internal Condonation Committee to deal with all Irregular Expenditure dating back from 2016/2017 to 2021/2022. Results of completed determination tests do not reflect any corrupt, criminal, or fraudulent activities. However, there are definitely cases to be referred to HR for consequence management subject to approval by the Acting CEO/CFO.

Out of two Project Finance Findings, one has been resolved. Confirmations engagements have been held with all provinces except Gauteng over monthly balance confirmations, and so the audit finding of a limitation of scope is only partially resolved.

Out of ten Finance Findings, seven have been resolved. The issue of creditors with debit balances incorrectly classified as payables is still under investigation and has not been resolved. The auditor found that cash and cash equivalents for provinces were incorrectly disclosed. This issue was only partly resolved, as an Internal Audit could not confirm the transfers for end of March.

Management has made progress in implementing corrective action to address the previous audit findings with about 86% resolution rate and control measures have been put in place to avoid recurrence of repeat findings.

Additional remarks

Ms Ngoasheng said that in the SIU report there were recommendations about Talana. The first one was that after having paid two invoices of R2.5 million in total, the HDA should no longer continue paying Avantino. The contract was valued at R15 million but the last invoices paid were those two invoices and the contract was cancelled. The other recommendation was that they should place Avantino on the database of restricted suppliers to prohibit them from doing business with the state. This was a laborious process but it has been done. This was done by National Treasury after their submission, and they are waiting on confirmation. SIU recommended that they should deal with three BEC and three BAC members. Two of the BEC members are no longer working for the organisation. Their court case is active and is going to sit on 24 June. It was recommended that action be taken against the BAC members for not detecting the fraudulent activities. The BAC members rely on the BAC report and do not do the due diligence that the SIU mentioned. One of the BAC members no longer works for the HDA. The remaining two have been given warning letters and training so that if they were to be appointed to serve on the BAC they would not rely on reports alone and request the actual documents. For Duncan Village, they only have a preliminary report. She is sure that the SIU will share the report that they showed to the Committee with the HDA.

Discussion

Ms Powell said that the HDA’s presentation was a tick-box exercise. The Acting CEO, Acting CFO and the current Board are not responsible for what the Committee has seen in terms of the 2020 Audit Report. It seems like there is some work being done to ensure some change after three years of requests by the Committee. However, the presentation being given today still does not touch on the depth and severity of the crisis that the entity has been in. It does not provide a level of detail that is fitting for Parliament in terms of the External Audit report. There was clearly a wanton disregard for procurement processes and there is a present concern by the SIU around the implementation of recommended remedial action. This has to be seen in the light of her, as well as other Members, repeated requests to the Chairperson during the Covid crisis to conduct detailed oversight and to call the HDA and the then-Minister to account before the Committee on procurement processes. These requests were ignored. Had the Committee exercised the appropriate oversight at the time and had they performed their Constitutional functions appropriately, a lot of the corruption could have been averted. It is appropriate at this stage, now that they have seen the culmination of this crisis, to remind the Committee that during the hard lockdown Minister Sisulu or the Board of the HDA was not summoned to appear before the Committee and to account for the CEO’s hiring and firing, the appointment, and dissolution of the Board and the Covid procurement processes that they knew were open to corruption. This serves as an important reminder that when an MP submits a request to the Chairperson on the basis of corruption suspicion and wants to hold a Minister or an entity accountable, then they must do so at the time. They should not wait for two years after the fact and then see the materialisation of corruption. 

The Auditor’s findings were very severe. The HDA had received a qualified audit opinion with matters of emphasis for 2019, 2020, and 2021. They didn’t have adequate measures in place to maintain records of project obligations. These obligations were misstated. The Auditor was unable to obtain sufficient, appropriate audit evidence for project obligations. Irregular and fruitless expenditure reached R147 million by the 2021 financial year. Supply chain management processes were not effectively maintained. Internal controls and required prescripts for supply chain management were not complied with. The entity didn’t have adequate systems in place for identifying or recording irregular expenditure. Financial statements that were submitted were not supported by records and material misstatements in audit reports were identified. The Audit report said that “appropriate steps were not taken by those responsible, the Accounting Authority and the Executive Authority, to prevent irregular expenditure, which, by the end of the financial year, had reached R147 million.” There was negligent non-adherence to the PFMA and Treasury regulations. At the same time, then-Minister Lindiwe Sisulu was shuffling everyone in the upper echelons of the HDA. For example, the CEO was hired, fired, and then acted as the Board chairperson, the Board itself was dissolved, and people were hired and fired. This is notwithstanding the scathing findings of the SIU about a number of contracts managed by the HAD and indicated blame against these same officials. In South Africa, consequence management seems to be lacking. We have some good laws and the Public Finance Management Act (PFMA) provides Parliament and members of the public with tools to hold officials accountable.

Section 65b of the PFMA requires that an executive authority, namely the Minister, which is responsible for a Department or an entity, table in the Legislature the findings of a disciplinary board, and any sanctions imposed by such a board, which heard a case of financial misconduct against an accounting officer or accounting authority in terms of section 81 or 83. She wrote to the HDA to indicate that the Committee had not received a Section 65 report. The Minister fired the Board and the CEO, and yet they had not seen any results from a disciplinary hearing. She was told by the HDA that no such Section 65b of the PFMA exists, despite all of the hirings and firings.

Section 83 of the PFMA deals with mismanagement of an accounting authority and officials of public entities. It states that the accounting authority for a public entity commits an act of financial misconduct if that accounting authority wilfully or negligently fails to comply with a number of PFMA requirements, makes or permits an irregular or fruitless or wasteful expenditure. If the accounting authority is on a Board, the Act says that each and every member is liable.

The HDA has told the Committee that they have established an Internal Condonation Committee to deal with all irregular expenditure that dates back from 2016 up until 2021/22 and that the results did not show any fraudulent activity. This does not reconcile with even the most preliminary findings of the SIU. The BAC is a primary example. The Committee was told that BAC officials were arrested in 2020 and there is criminal culpability that points to fraud and corruption. This does not reconcile with the findings presented by the HDA. How is this finding possible given the number of HDA officials that were arrested in relation to the Talana Hostel issue? Some of the BAC members were given training and a warning letter; are these the same officials that were arrested and charged by the NPA?

What is the Acting CEO’s view on the findings of the SIU and the HDA not aligning? What is the mandate of the Condonation Committee, and can the Members please be provided with the composition and the terms of reference of the Committee? What was the mandate of the external professionals employed by the HDA to perform functions related to the assessment of irregular expenditure? Do these experts have forensic audit experience? When one is complying with the Auditor-General or external auditing recommendations, it is always a tick-box exercise. Has there been a deep dive into the forensic component of this wasteful expenditure? Is there a forensic audit or investigation being done? What investigations is the HDA conducting into the activities of the previous Board, CEOs and BAC members? She did not want to make this political, but they released a number of media statements about who these people were, who their connections were, and why they had been hired and fired. There has been a huge storm around this. Are there any investigations going on into what happened there? How many officials have the HDA or the Condonation Committee recommended for criminal investigation? Her guess is none; given that they don’t suspect any fraud. Given the findings of the SIU, it could be assumed that there was gross negligence. Would the HDA agree that there may have been gross negligence by the accounting authority, and if so, would they support a criminal referral of the previous accounting authority?

Her office will be making a blanket referral of the previous accounting authority, namely, the Board, to the Hawks in terms of Section 86 of the PFMA. After having heard from the Advocate at the SIU that they can make a blanket referral for forensic review of the Condonation Committee’s report, she will also be submitting a referral to the SIU to review all the findings of the HDA’s Internal Condonation Committee and the findings of the external experts. For the Director-General of the Department – with regards to the NHBRC, the Committee saw in the SIU report that a referral had been submitted to the NHBRC for it to take administrative action against Avantino. She was told previously by the entity that to date, the NHBRC is only considering the matter and that the investigation is being finalised. A decision still needs to be made by the NHBRC about whether disciplinary action should be taken. Those individuals were arrested in December 2020 and it has now been eighteen months since the NPA charged the director of Avantino with fraud. She was told in response to a Parliamentary question that the NHBRC has not even made a decision about whether disciplinary action will be pursued. The Committee was also told that both the National and Provincial Departments have not blacklisted a single supplier since 2016.

Ms Sihlwayi said that the SIU’s presentation was very informative and that the Department made the recovery plan for the HDA clear. During this recovery process, the Minister should not be pressured by other issues and should take her time because it is very clear that the HDA was established but it did not have the measures in place to protect the people of the country. She requested that in addition to the presentation, Members are given a clear organisational structure of the HDA. This is where the crux of the matter lies. The entity should not be monitored by management alone but also by the Presidency. The President should be aware of the issues with service delivery and procurement. Those involved in corruption within the HDA must answer to the public.

Dr Ratshitanga said that something that was not made explicit in the SIU report is that the HDA is very serious about dealing with this matter. The SIU did not find that there was a lack of cooperation in their investigations. They are cooperating with the SIU so that they can get to the bottom of this matter and do not wish for any more irregular expenditure. These cases are in the minority when compared to the other contracts that the HDA is involved in. The Board does not want these cases to happen, because they want the public to have confidence that their resources have been placed in an institution that looks after them and is law-abiding. They regret that there are these few instances of irregular expenditure in the vast amount of HDA projects. The HDA’s ultimate ambition is to not have any qualified audits because the prescripts of the law are clear as to how these matters should be dealt with.

There have been consequence management actions taken against some of the officials involved. The matters of the SIU are still in court and the outcomes of these processes will be very helpful and will be watched closely. As the HDA, they ask for the chance to thoroughly engage with the SIU report. They only received the report when it was presented today. Once they receive it officially, they will scrutinise it very closely to make sure that the recommendations are implemented and that there are no reoccurrences.

Consequence management is not limited to employees of the organisation. The HDA works with service providers and it is important that when they see a trend of poor quality of work or misrepresentation by the provider, consequence management is also undertaken.  These contracts are often terminated. There is also a Clause of Retention that governs their relationship with contractors. This means that the HDA can retain payment if the contractors are not doing their job properly. Consequence management does not only end with employees of the agency but also the service providers.

National Treasury recognises the matter of irregular expenditure and how it needs to be dealt with internally by the organisation. It issued guidelines on irregular expenditure in May 2014, and these included the importance of the Condonation Committee. It is important because it helps guide the entity on what actions need to be taken. In cases where the condonation is granted by Treasury, there may be no further action than what the entity feels needs to be taken. When condonation is not granted, then there is a need to undertake processes to recover the funds from the relevant people. Condonation is granted under very strict conditions. The Condonation Committee can make recommendations when it comes to irregular expenditure but the final decision lies with the National Treasury. He was not able to comment on Ms Powell’s actions to refer the Committee and its recommendations to the Hawks. Matters of condonation are ultimately dealt with by Treasury.

The HDA is very focused on reviewing its organisational structure, in light of the huge number of programmes and projects that it has and through its interaction with the Executive Authority.  They will keep the Portfolio Committee updated. 

Ms Ngoasheng said that when it came to the previous Board, there were issues that were raised by internal auditors and referred to a law firm. The firm is currently investigating the questionable activities. The Head of Corporate Support and Head of Corporate Strategic Support are suspended and are undergoing disciplinary processes. A Provincial Head is also suspended and facing disciplinary processes for not fulfilling their duties. There are other officials within the HDA who are facing disciplinary processes but are not on suspension. The legal manager still needs to confirm how many cases of non-performance there are within the entity. Two officials in relation to Talana are currently involved in a court case.

The terms of reference of the Condonation Committee were established in relation to the irregular expenditure framework that was approved by the Board. This, and the composition of the Committee, will be sent to the Members.

She agrees that the SIU report is scathing. These issues will be dealt with one by one. Previously no one dealt with project obligations. They now have dedicated people for it and are paying particular attention to that. On the issue of supply chain management, they still have a few vacancies at senior and administrative levels. Once the moratorium on recruitment has been dealt with, then they will be able to fill those vacancies and strengthen the supply chain management unit. The entity has SCM as one of its standing items of the Executive Committee. She understands Ms Powell’s point about preventing corruption from happening. There are a number of checks and balances that need to be done before signing any invoice or approving any payment. They make sure this is done before signing off on anything. Ms Powell wrote to the HDA and did not receive a satisfactory answer. She asked Ms Powell to direct that same correspondence to the Board chair so that it can be adequately responded to.

Ms Powell said that the letter was pertaining to the 2020/21 financial year and was written to the HDA asking what action had been taken in terms of Section 65b of the PFMA. She did receive a response saying that no action had been taken. She will redirect a new letter. The acting CEO admitted that the report is scathing. Everyone knows what happened during that period and yet no one can seem to speak openly about it. Why does the HDA report say that there is no evidence of corruption when this is clearly not the case? Many people are facing criminal charges so this cannot be correct. Can they get clarity on why the HDA report says this?

Ms Ngoasheng said that the presentation mentioned that 65 transactions have been investigated. 10 transactions still need to be finalised by 31 May. She is not sure if the final financial spreadsheet for 2020/21 appeared in the presentation or if it was only a summary. She can share the report of the Condonation Committee. They go line-by-line, focus on issues one at a time and make recommendations accordingly. They have been very thorough. For example, if the committee finds that the tax affairs of the supplier were not in order, then that does not count as theft. It just means that the tax affairs of the supplier were not in order. She is sure that once the Portfolio Committee has seen the report they will be satisfied. The team that is assisting the HDA with this is also subjected to internal audits and risk management. Some members of the team have a legal background. There are also supply chain management experts in the team and so the entity should now be in a position to detect fraud or theft.

Dr Ratshitanga said that the cases opened by the SIU need to be concluded. As far as allegations of criminal conduct and fraud are concerned, the SIU is currently involved in taking criminal cases to court. The HDA is awaiting the outcome of these cases. They cannot assume what the outcomes of those cases will be. However, stating the reality of what is taking place would not hurt. They do not have an issue with augmenting the report.

Mr Tshangana said that the NHBRC has attended to the matter. They sourced legal opinion on how best to deal with this issue. However, there are complications. One of the complications is that the TRUs are not involved with the NHBRC, as it is a temporary building. There is no need for enrolment and that creates a complication of jurisdiction over the project. If it is not enrolled, then there are questions as to whether the NHBRC can act on it. There is also no requirement for the service provider to be registered in the provision of TRUs. The matter has been discussed with the CEO and the legal opinion is that the conducting parties (which in this case, is the province and the HDA) were conducting with the service providers. The conducting parties themselves have jurisdiction over the service provider and they can take action against them. In this case, they have taken action. There is criminal action against the service provider and both the HDA and the province are assisting the SIU. If it was a normal housing project, then the NHBRC would have acted within a month. The CEO of the NHBRC has offered to give the Department a report on the work that they have done on this.

The report of the SIU is good and the Department welcomes it. The Members should be reminded that it is the Department that pays for these investigations. At some point, they will be asked to account for the money that they are paying for these investigations. The money is going to good use and they support the work of the SIU. Ms Sihlwayi has been very consistent with her concerns about the capacity of the M&E component of the Department. The Department of Human Settlements is not like the Public Works Department that has provincial or regional structures, over and above the fact that there are Provincial Departments of Human Settlements. The Department would like to have more capacity to monitor what is happening in the provinces, but it also has challenges with the compensation of employees budget which is getting smaller and smaller. Increasing the capacity to monitor what is happening in the provinces is what the Department wants to do, but there is a limit. The Department has decided to invest in technology because sometimes it is not so much about boots on the ground, but about whether they can use existing or new technology to be able to pick up corruption before it happens. In terms of procurement, it is a challenge because there is an Accounting Officer or Accounting Authority in the province or entity. If the procurement processes go wrong, it is these individuals’ responsibility. Monitoring this is going to be a challenge for the Department because if things do go wrong, the Accounting Officer is the one who must take full responsibility for both the good and the bad. There is no amount of monitoring that will fix things in this regard. At the end of the day, government needs to make sure that it appoints people who are fit for the job and understand what it means to be an Accounting Officer. He is optimistic about the HDA capacity. It varies from region to region. In KwaZulu-Natal, Western Cape, and Northern Cape, the HDA team is doing a sterling job and they have good infrastructure. North West is still struggling to find the right capacity and Limpopo also has issues. The Department needs to provide the right capacity to these provinces. But over time, he is very optimistic that they will be able to get the right capacity in all of the provinces. He thanked the Members for their comments and questions that will enhance the quality of the Department’s work.

Deputy Minister Tshwete noted and appreciated the compliments towards the current Board and executive team. While there is still a lot to be done, it is important to give credit where it’s due. The SIU presentation was very informative and painted an unfortunate picture of what has been happening behind the scenes. It is crucial and beneficial for the current leadership of the HDA to be exposed to the gravity of the work that lies ahead of them. No stone will be left unturned. Those who took advantage of poor South Africans will be made accountable for their actions. She is happy to hear that there are HDA officials that are in court. She saw in the newspapers that two of these officials were refused bail. This is a good thing and will teach people lessons. She is confident that the HDA is in the right hands. The appointment of the CEO will reinforce this and she is suitable for the position. She thanked the Portfolio Committee for their sterling job of oversight. She also thanked the chairperson of the HDA for his work as a leader and in steering the entity in the right direction. Lastly, she thanked the Director-General for the support that he has provided.

The Chairperson thanked Mr Malatji for leading the meeting and the SIU and the Department for their reports. She congratulated the new Board for the sterling work that they are doing. She also thanked Dr Mahapa, who was a previous administrator and previously presented to the Committee on what steps the entity was taking. With the hands-on approach of Dr Ratshitanga, the HDA will be able to resolve its issues and become a strong entity. She also thanked the Director-General. At the time that the HDA had problems, when the Committee was still Human Settlements and Water and Sanitation, the DG was tasked with monitoring the HDA and the NHBRC. He also helped with the stabilisation of the Water and Sanitation Department, which was in a serious crisis. This work is well-appreciated. The Committee supports the SIU to make sure that those who have faulted the system are held responsible. The Committee will continue to perform oversight as it has been doing.

Mr Malatji said that the meeting was fruitful. He thanked the HDA, the Deputy Minister, and the Director-General and said that the Committee’s duty is to implement the measures that they have spoken on and he thanked everyone for their patience.

The meeting was adjourned.