20 030% ?8'.pr - II igl/? .r 4 COMBATTING FRAUD AND CORRUPTION GOVERNANCE, RISK AND COMPLIANCE BRANCH (PRESTIGE FUNERAL SERVICES, IRREGULAR EXPENDITURE, WW ABUSE 0F VARIATION ORDERS UNSCHEDULED MAINTENANCE) SCOPA Department: 1 Public Works and Infrastructure REPUBLIC OF SOUTH AFRICA 0 3 MARC 2020 '3in 319w uononponul suonov annoeuog swafmd SJgedea pue saseo 13npuoosgw [egaueugd Jame uone?gmenul lemmul ;o s?ugpugd slauaund 31913 01 panama senuemb?eu] b' Aeo-m-Aea pelnpeuosun 3 E?mm can" a: . - The DPWI Anti-Corruption and Fraud Awareness Unit (ACU) received a request from the office of the Director?General during November 2018 to conduct an investigation into allegations of irregularities related to services rendered by Crocia Events (PTY) LTD (Crocia) within the Department. is- It was suspected that funeral costs paid to Crocia were exorbitant and not in accordance with the contract entered into with the Department. it is further alleged that the Department did not receive value for money in respect of payments made. - The internal investigation conducted revealed that the Project was characterized by poor contract management and payment irregularities: - - The documents analysis on the services requested, billed and payments made for the funerals of Ms Mandela, Dr Skweyiya and Amb Modise revealed the following anomalies:- 0 For the funeral of Ms Mandela and Dr. Skweyiya the service provider intentionally and fraudulently infused a management fee of R7,7m into the final invoices despite the contract not catering for a management fee to be charged; The amounts of the quotation exceeded the calculated specification amount for the 3 funerals; The quotations were not in line with the invoices and in accordance with the tender pricing schedule, there were several discrepancies between number of days, quantities and unit prices respectively on these documents; In all three (3) funerals, there were deviations from the contractually agreed pricing schedule; In all three (3) funerals, there were variations from the contractually agreed pricing schedule; and in all three (3) funerals, there were irreconcilable items from the contractually agreed pricing schedule,S ?hf. The officials who administered the contracts failed to perform detailed reviews on the relevant supporting documentation (including the pricing schedule, specifications, quotations and invoices). DPWI officials failed to identify the inconsistencies between these documents before quotations were accepted and approved and/or before invoices were approved for payment for the three (3) funerals in question. The internal investigation conducted highlighted several areas of concern relating to the conduct of DPWI officials in managing the contract entered into between the Department and the service provider which points to seriously irregular conduct by the official. The quantum of the losses suffered by the Department which is estimated at millions of Rands due to misconduct by DPWI officials and irregular payments fraudulent payments made to the service provider is yet to be fully determined, the Department has in-sourced services of a Senior Counsel with a view to compute the losses suffered and initiate processes to recover the amounts unjustifiably paid to the service provider. Emanating from an investigation conducted the following were recommended for implementation by - The Department should consider taking the necessary disciplinary action against all officials who administered the contract and approved payments and hold them accountable for failure to exercise due diligence in performing their tasks resulting in significant financial losses to the Department. - It was recommended that the Department considers soliciting the assistance of the Special investigating Unit to conduct a comprehensive investigation into the conduct of the Departmental officials leading to the award of the Funeral Services contracts to Crocia and subsequent payment made with a View to supporting a criminal referral to the SAPS. - The DPWI should consider initiating a Civil Claim to recover all unjustifiable fraudulent payments made to the service provider. The DPWI has since secured the services of a highly regarded SC to initiate recovery process as well as support the criminal referrals. . . .. .1 A. 7...V. 1 .. . . rh pun Zrk IRREGULAR EXPENDITURE PROCUREMENT IRREGULARITIES JHB REGIONAL OFFICE - The investigation conducted revealed that officials at the DPWI Johannesburg Regional Office awarded contracts to a Manangwe Projects Enterprise owned by a Government employee in contravention of Public Service Regulation, 2016 13 The contract was awarded to the entity despite its owner disclosing on PA-11 Form: Declaration of Bidder?s interest and past Supply Chain Management practices that she was Government employee. Further the company appointed was not included in the list of approved I vetted service providers for security services. Disciplinary Hearings against the Head of SCM (Mr M. Magoso) are currently underway. As a result the Department incurred irregular expenditure amounting to 185,221.31. ABUSE OF VARIATION ORDERS BY DPWI OFFICIALS C-MAX CORRECTIONAL CENTRE PTA REGIONAL OFFICE An investigation was conducted into a complaint of abuse of variation orders by DPWI officials. The project was characterized by inadequate project scoping, lack of proper planning and possible project mismanagement. The project was for upgrading an existing C-Max into high security detention facility at Pretoria Prison and the project amounted was initially budgeted for 8, 127, 615.93 and the point of the investigation a total of R16, 267, 580.64 was paid to the contractor. An investigation conducted by the Anti- Corruption Unit concluded that wasteful expenditure was incurred in respect of a project awarded by the Pretoria Regional Office (0 Max Prison). it was concluded that the officials overseeing the contract failed to oversee the work and approval of advance payment of R12 000 000.00. The investigation conducted recommended that the disciplinary action be considered against the Project Manager (Mr Bapela) and Head of Projects at the PTA Regional Office (Mr Sewada) for misconduct. Mr Bapela was sanctioned to Demotion and three months suspension from work without pay, Mr Sewada was sanctioned to three months suspension from work without pay. internal Legal services Unit is currently in the process of recovering losses suffered by the Department. 10 3:5- OTHER ABUSE OF VARIATION ORDERS BY DPWI OFFICIALS ZEERUST POLICE STATION MMABATHO REGIONAL OFFICE - There was a contravention to DPWI processes in the construction of additional accommodation, repairs and renovations to existing facilities at Zeerust Police Station. The variation order was executed without the authority of the Director General and/ or the Delegated Authority. - Disciplinary action was instituted against the Project Manager Mr. Moeng at Mmabatho Regional Office for causing the Department to incur irregular expenditure amounting R1, 517, 700.80, by issuing an instruction to the Principal Agent without an approval from the Director General and/or having the necessary delegation. Mr Moeng was issued with a written warning. I. . 3 4/ 3.3.. . 1. .3. 4 Cf_llJulurn)?? . . WE ns?c?ed Ie?tf?flai n?na . . . i 2?1 Introd-uction?& Background The ACU conducted a detection review on day to day maintenance to identify anomalies in respect of suspected irregular payments effected and possible duplicate payments effected A high level of frequency was noted for payments effected in respect of day to day maintenance of air conditioners, geysers, plumbing, boiler services, access control and pots It is evident that the magnitude of the consolidated expenditure for day to day maintenance is not economic and does not constitute an effective and efficient use of resources. The ACU employed a data driven approach to conduct the Detection Review assisted by the Forensic Data Analytics team in the SIU The team ran trends analysis on the data of the DPW, by identifying red flags, in order to highlight relevant trends and patterns in day to day maintenance expenditure Red flags are not evidence of wrong?doing, they are an indication that something may need to be investigated or corrected from a management perspective Red Flags are indicators that are detected once a criteria is set to identify anomalies in a business process 13 a I . I The ACU obtained the LOGIS (NT), PMIS (DPW) and WCS (DPW) data 65 queries have been written for the detection review in phase one Contractors/Suppliers Rendering Service/Maintenance In PMIS Buildings Suppliers With The Highest Number of Payments Expenditure incurred Per Building Repeated Services Performed by Suppliers on Same Property Frequency Of Payments for Services Performed on Premises By Contractor/Supplier Suppliers using the same address/bank account number Possible duplicate payments same building/same amount Whether contractors received payment for services after lease expire dates 14 ,h ?s??l?e?auTed Expenditure?Per Region 10 YEAR PERIOD PERIOD REGION TOTAL AMOUNT REGION TOTALAMOUNT PRETORIA 2 572 511 011,01 PRETORIA 1 132 531 784,04 CAPE TOWN 1 278 954 048,42 CAPE TOWN 629 117 681,68 DURBAN 1 117 714 779,65 DURBAN 483 754 989,30 JOHANNESBURG 643 027 871,21 JOHANNESBURG 349 377 903,02 POLOKWANE 411 730 809,44 MMABATHO 161 808 548,06 PORT ELIZABETH 294 932 432,20 POLOKWANE 161 535 601,19 MMABATHO 284 130 392,69 PORT ELIZABETH 136 619 511,16 NELSPRUIT 265 583 164,56 NELSPRUIT 96 232 959,06 BLOEMFONTEIN 206 116 371,01 BLOEMFONTEIN 93 342 862,43 KIMBERLEY 91 148 270,58 KIMBERLEY 31 468 200,58 UMTATA 87 046 652,19 UMTATA 25 386 268,59 15 I20 91? BNIGVHJ. VWEHVE OanHzlEl'l 13171179 9L8 171 Marni . - i 180d Ina-nu rm- i 131m g! V1OLVWV 89151 IEZ 9t? 5133 f08d GNV 65929 Z615 9L NMOJ. 3dV3 I) oz?zss 2178 ?17 33 [08d GNV BNIGVHJ. VDNISVIN .LNE ?17711: 0&0 68 NMOL NV NWZEIW CINV EIL IS NMOJ. I) SVE) CINV 66 1N3 DNEISLOW 1761719 m3 ZS NMOJ. 33 DNIGVELL OMHWVANI 9?69 IVIN GNV 119928 81.78 95 180d 898 1:91: Vl?clOlElHd HIV anan 9S NMO.L '33 68'623 I68 201: 33 602 DNIGVHJ. E9391: 1769 6L GNV BNIGVHJ. V1 896 99 DHHESENNVHOF 33 603 DNIGVHJ. 178'69?3 I96 I8 NV NVVZEIIN GNV [17'289 620 8813 33 .L .LVH 1712 '9171 L178 86 IVW (JNV 89001: 8917 017 I) .L 890988 17W SET NMOJ. 3dV3 .I.S V/l I) LEI: BNIOVHJ. HVEIB .LSI 90/. 0172 V/l 33 EJNIGVHJ. HVEIE) 1513 .LS IEIQL HINVN NOIDEIH EHNVN lelol EIINVN NOISHH HWVN ?OlHEl'd HVEIA HUI-M OI A0455 Jed amupuadxa - Ext ., "1 -- .5 Expendltu're Per Building 10 YEAR PERIOD 3 YEAR PERIOD PROPCODE BUILDING REGION NAME Total PROPCODE BUILDING REGION NAME Total 005279 TSHWANE DEFENCE PRETORIA 292 415 675,07 005279 TSHWANE DEFENCE PRETORIA 152 351 806,83 008544 PAUL KRUGER BUILDING PRETORIA 241 558 747,31 008544 PAUL KRUGER BUILDING PRETORIA 69 226 862,69 COMPLEX: CENTRAL 312010 ERF 28 PRETORIA 153 501 331,48 137485 PRISON PRETORIA 61 207 079,17 COMPLEX: AIR FORCE COMPLEX: PRISON 008838 BASE POLOKWANE 90 217,943,62 095799 WESTVILLE DURBAN 47 561 931,15 COMPLEX: CENTRAL NEW CO-OPERATION 137485 PRISON PRETORIA 89 592 705,62 004333 BUILDING PRETORIA 41 013 321,10 NEW CO-OPERATION COMPLEX: WONDERBOOM 004333 BUILDING PRETORIA 76 361 294,67 012284 MIL BASE PRETORIA 40 004 876,04 COMPLEX: PRISON COMPLEX: NAVAL BASE 095799 WESTVILLE DURBAN 74 166 226,15 061628 SALDANHA CAPE TOWN 35 575 360,06 COMPLEX: CGO CENTRAL 012284 WONDERBOOM MIL BASE PRETORIA 71 548 218,03 004649 GOVERNMENT OFFICES PRETORIA 35 141 464,33 154900 COMPLEX: TEK BASE PRETORIA 63 180 927,09 303413 OLD SA RESERVE BANK PRETORIA 34 931 026,84 COMPLEX: ZONDERWATER 002825 PRISON PRETORIA 62 528 359,63 256001 COMPLEX: SAPS LOGISTICS PRETORIA 34 596 033,56 f-?Jn[15in a I utth 17 REGION NAME BUILDING SUPPLIER NAME FROM DATE LAST DATE TOTAL AMOUNT PAID f? HLUMANI WASTEMAN PTY LTD ZOJUN2006 ZOJUNZOOE 22 544,@ CAPE INDUSTRIAL CC 27JUN2006 27JUN2006 1 026,00 CAPE TOWN GREYSTONE TRADING 389 CC 28JUL2006 24 954,60 PRETORIA OKLAHOMA HOTEL STAND 1877 HAT SPECIALIST CC 13SEP2007 13SEP2007 3 447,40 PRETORIA THIBAULT NAVARRE COMPLEX SUPREMEAIR (PTY) LTD 20APR2006 20APR2006 59 409,20 PRETORIA MVARRE COMPLEX SUPREMEAIR (PTY) LTD 25APR2006 25APR2006 59 409,29 PRETORIA THIBAULT NAVARRE COMPLEX BATTERY CARE CC 02MAY2006 02MAY2006 113 930,00 PRETORIA THIBAULT NAVARRE COMPLEX METSI CHEM (PTY) LTD 22MAY2006 22MAY2006 513,00 PETQRIA MLTEAVARRE COMPLEX METSI CHEM (PTY) LTD 09JUN2006 OQJUNZOOE 410,40 PRETORIA THIBAULT NAVARRE COMPLEX 8: DIESEL FUEL SERVICES CC 1 740,00 THIBAULT NAVARRE COMPLEX at DIESEL FUEL SERVICES CC 13JUL2006 281UL2006 1 160,00 PRETORIA THIBAULT NAVARRE COMPLEX BATTERY CARE CC 25JUL2006 O7MAY2007 ?513,539 BETORJL THIBAULT NAVARRE COMPLEX SUPREMEAIR (PTY) LTD 31JUL2006 15AU62005 131_925,03 PRETORIA THIBAULT NAVARRE COMPLEX 8: DIESEL FUEL SERVICES CC 060CT2006 07MAR2008 79 306,54 NAVARRE BATTERY CARE cc 23NOV2006 23NOV2006 i323 336,53 PRETORIA 18 1% - - 7- Maint??EFe? Frequency Of'Payments 10 YEAR PERIOD 3 YEAR PERIOD NUMBER OF NUMBER OF SUPPLIER NAME REGION NAME PAYMENTS TOTAL AMOUNT SUPPLIER NAME REGION NAME PAYMENTS TOTAL AMOUNT IST GEAR TRADING 177 CC ST CAPE TOWN 16973 240 706 122,67 15T GEAR TRADING 177 CC ST CAPE TOWN 8302 135 144 334,68 SHANAAZ AND MEZAAN HAT SPECIALIST CC POLOKWANE 4596 40 468 100,63 PLUMBING AN CAPE TOWN 5368 81 951 569,34 HAT SPECIALIST CC PRETORIA 10787 138 029 682,47 KROUCAMP PLUMBERS CC. CAPE TOWN 3447 56 419 093,20 PEST RELIEVERS (40) CAPE TOWN 14116 7 169 823,02 ANIL JESSA CC CAPE TOWN 3127 34 882 068,22 SUPERFECTA TRADING 209 CC JOHANNESBURG 3682 66 948 295,12 OIL AND GAS CC CAPE TOWN 2850 51 713 229,43 SUPERFECTA TRADING 209 CC PRETORIA 2456 102 891 229,89 JASAIR PTY LTD JOHANNESBURG 2697 25 888 624,71 SHANAAZ AND MEZAAN PLUMBING AN CAPE TOWN 5763 89 070 127,47 NO FEAR SYSTEMS CC CAPE TOWN 2213 32 620 481,89 ELECTRIM CONTROL SYSTEMS CC PRETORIA 5635 27 004 112,72 HENVEN VERKOELING BK POLOKWANE 2101 20 745 362,14 MMAMONIBOLLA TRADING CC NELSPRUIT 1 17 469,37 INYAMEKO TRADING 1442 CC CAPE TOWN 1978 52 877 674,94 MMAMONIBOLLA TRADING CC POLOKWANE 5388 31 059 288,48 WESTPRO FLUID HANDLING SYSTEMS CAPE TOWN 5367 66 807 492,99 JASAIR PTY LTD JOHANNESBURG 5359 44 305 657,83 8: DIESEL FUEL SERVICES CC PRETORIA 5186 27 219 863,18 INDUSTRIAL CC CAPE TOWN 4963 19 588 184,04 p.32"! pain 19 f- - 9 . mpg-um Internal Control Weaknesses Identified - Lack of verification of serviceable items geysers, boilers, air conditioners and pots Non existence of maintenance plan reflecting scheduled maintenance per building and its components - There is no register reflecting building components, their life spans and conditions Possible Fraud Risks . Fictitious calls from client departments resulting in the department effecting payments for services not rendered . Collusion between clIent department control works manager and service providers resulting in payment for services not rendered . Abuse of emergency services every service irregularly categorized as emergency in order to override normal SCM processes Deliberate splitting of services to circumvent SCM processes 20 i nscx?heHUIe?di?iaiint?na Internal Investigations PRETORIA REGIONAL OFFICE At one state owned property at 6 Grace Av, Meyerspark, the swimming pool and water feature to be maintained are not in working order and had not been in a working order for more than a year. DPW has been and is currently continuing to pay for said maintenance at R7000 per month for the swimming pool and R7000 per month for the water feature. Three (3) companies employed by the DPW to maintain the swimming pools and water features over the last two (2) years employed the brother of the Chief Horticulturist to conduct the actual work. Disciplinary processes under way against implicated officials Legal services to recover R84, 704.47 from Sakhile Business Enterprises and 53, 405.16 from Gau?Flora for payments made for services not rendered ed: The GRC through the Office of the Director-General requested Ministry to motivate for the Presidential Proclamation (through the SIU) due to the serious allegations pertaining to unscheduled maintenance. The Minister of Public Works approved the request on 31/01/2018 and correspondence was fonNarded to the Head of the SIU motivating for a Presidential Proclamation on day to day maintenance. The SIU acceded to the DPW Request, meetings were held between the DPW and the SIU to commence with the legislative processes to motivate for the Proclamation. The SIU made a motivation to the President to extend Proclamation 38 of 2010. The President has signed the Proclamation Number 20 of 2018 extension of Proclamation 38 of 2010 as amended by Proclamation 27 of 2015. The Proclamation was gazetted in government gazette on the 13 July 2018. The Proclamation will be focusing on five DPW Regional Offices, namely: - Pretoria Regional Office; Bloemfontein Regional Office; - Cape Town Regional Office, - Durban Regional Office; and - Johannesburg Regional Office. 23 Facilities Management should ensure that physical verification of all building components for each building is conducted to ascertain their existence Facilities Management should conduct building conditions assessment to determine state of the building and its components Facilities Management should develop maintenance plan reflecting scheduled maintenance per building and its components Facilities Management should develop a register reflecting building components, their life spans, and condition equipment that has already passed its life span should be replaced Facilities management with assistance from the Information Technology Unit should develop an early warning system to identify suspicious payments e.g. for same service, items, areas and period Facilities management should engage Client Departments to develop framework in consultation with National Treasury to allow department to purchase capital equipment through Capital Expenditure budget on the client Department?s behalf Facilities Management should consider the above proposed action plans when implementing Facilities Management contract for 300 earmarked building and in developing Facility Management Strategy 24 *hh_ MamtenanceAnd RepaurSJ?r a - The Anti-Corruption Unit conducted and is currently conducting investigation into allegations of serious maladministration in respect of projects awarded by the DPW. - The DPW engaged services of various suppliers to render various maintenance and repairs projects. These service providers failed to fulfil the terms of contracts as they failed to complete their work with due diligence, regularity and expedition and to bring the work to practical completion resulting in cancellations of their contracts. - Of particular concern to the Department was that huge amounts of money were paid to these contractors at the time of cancellations of their contracts in some instances to values exceeding the contract amount. lt suspected that the Department did not get value for money in this regard and/or there is no justification for the payments made. Of further concern to the Department was that when other service providers were appointed to complete the outstanding work the contract amounts were in all instances greater than the initial contract amount which fortifies the notion that payments made to the initial contractors cannot be justified and/or the Department did not receive value for money for payments made. 26 ?3 ?Ma?i??a?a End Repairs JHB R0 Projects Name of Contractor Nature of services Date of award Contract amount Payments at the time of cancellation of contract Mathabatha Building Eden Park Police Station: 12 July 2011 R4, 306, 181.23 R7, 067, 797.00 Suppliers CC Repairs and renovation contract Zwa-Shu Trading JV Phumi Replacement of boilers and 20 January 2012 R18, 824, 992.66 R13, 464, 954.68 Trading maintenance of boilers for period of 24 months Ineelo Trading Enterprise CC Condition based 13 March 2015 R4, 114, 043.40 R1, 632,143.70 maintenance for sewer plant Nzwalo Investments Repair and maintenance of 10 December 2008 R13, 811, 639.22 R6, 855, 024.67 mechanical and electrical installations Lumacon Air Conditioning Benoni Modderbee Prison: 17 December 2008 R13, 811, 639.22 R7, 758, 566.04 Repair and Maintenance of mechanical and electrical installations Nthatheng Trading Tsakane Magistrate Office: 08 July 2005 R10, 988, 743.26 R12, 593, 026.70 Additional accommodation: construction of new building Mperere Legafe JV SANDF Heidelberg 10 October 2008 R4, 880, 000.00 R4, 374, 491.57 Gymnasium: Head Quarters Sincindi Projects CC Oberholzer Magistrate Office: Security measures upgrade including minor works sewerage pipes 27 November Realeka investments Kagiso Magistrate Court: Construction of new building 21 May 2007 R27, 181, 957.60 R22, 788, 955.14 Wk rs JH .RO?Projec?t's The investigation conducted by the ACU revealed that these projects were characterised by:? - The Project Risk Assessment conducted prior to the awards were disregarded by the Evaluation Committees, This led to the appointment of unsuitable contractors. Poor Project Management, the assigned Project Managers and Principal Agents do not exercise due diligence during the execution of the Projects. - Payments made are not justifiable or in accordance with the Project Milestones. - Projects not completed within the Projects timeframes. - Contractors not delivering on their contract obligations leading to contract cancellations at a loss to the Department. - Project Managers/Principal Agents not issuing final accounts to recover cancellation losses. - Secondary contractors in most instances appointed in excess of the original contract amounts. 28 - On completion of the investigation the ACU Disciplinary actions against 42 officials at the JHB Regional Office for various misconducts relating to project mismanagement and failure to comply with SCM directives. 8 contractors for Blacklisting from conducting business with the DPW State due to failure to fulfil their contract obligations to the DPW State. The Legal Services Unit was also advised to consider instituting recovery processes to recover an amount estimated at 27m for losses incurred to non-performance and subsequent cancelation of contracts. 3 Referrals to be made to Professional Bodies to consider sanctioning their members (Principal Agents) for failure to exercise due diligence in executing their tasks. 29 OE :ausqam I000 euode 59x Sea amnud enu33 ngo1aJd 5133.115 qupew pue uewsog Jug) Humane 093 9110M anqnd mmo peaH pue swam anqnd ;o wawuedaa mucus? nQAxueui