siu presentation to portfolio committee: justice and constitutional development 31 march 2011

SIU Presentation SIU Presentation toto

Portfolio Committee: Justice and Constitutional Development

31 March 201131 March 2011

31 March 2011 1SIU presentation to PC on Justice and Constitutional Development

Summary

1. Introduction to SIU, mandate and legal scope2. Strategy Overview3. Building capacity4. Working with other government initiatives 5. Overview of performance6. Challenges in dealing with corruption7. Current SIU Model8. Finance Overview9. Conclusion

“Corruption hurts the poor disproportionately by diverting funds intended for development, undermining a government’s ability to provide basic services,

feeding inequality and injustice, and discouraging foreign investment and aid.” Kofi Anan


SIU mandate and legal scope

• Started out: Heath Commission, 1995• Set up in terms of the SIU Act 74/1996

– still function much like commission of enquiry – current SIU established by Proclamation R118 of 2001– separate from law enforcement agencies but work closely together

• Major functions of the SIU:– investigate corruption and maladministration (ie not just crime)– institute civil legal action to correct any wrongdoing

• Investigations mandated: by a Proclamation from President• Special powers:

– subpoena, search and seizure, interrogate witnesses under oath – institute civil litigation to recover monies lost– not power of arrest, prosecution – can assist and facilitate – not power to take disciplinary action – recommend and assist


About the SIU

• Facilitate: concrete legal outcomes to investigations – ie– criminal (prosecutions) working with SAPS and NPA – civil litigation to recover and – disciplinary action

• Last 5 years: massive expansion involving development of multi-disciplinary forensic capability comprised of: – forensic investigators, lawyers and accountants – cyber forensic and data analysis experts and – project management capacity

• Mixed Funding model: – baseline funding from National Treasury allocation - not sufficient– additional funding secured through partnerships with departments

• build capacity in state and reduce reliance on the private sector• Compete:

– with forensic firms to provide more cost effective service to the state


About the SIU cont...

• Cooperation: developed close working relationships with: – law enforcement: SAPS (especially the Hawks), NPA – National Treasury bodies: Accountant-General, SARS, FIC – oversight bodies: Auditor-General, DPSA, PSC, Public Protector, Scopa, etc– individual departments, provinces and other institutions

• Focus areas:– large scale fraud and corruption where multiple small cases – increasing focus on procurement related fraud and corruption– Assist with improving systems and processes to prevent corruption – use of government data to indentify potential irregularities pro-actively

5SIU presentation to PC on Justice and Constitutional Development31 March 2011

Vision: • Working together to rid society of corruption

Mission: • We are a state body that fights corruption through quality investigations and litigation.

Values: • integrity, cooperation, professionalism, drive and effectiveness

Strategic goal: • To contribute to the reduction of corruption and the perceptions of corruption• The SIU aims to make this contribution as part of the broader anti-corruption

strategy of government

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SIU strategy framework

Outcome 3: All people in South Africa are and feel safe • Output 3: Corruption eradicated, including bribery, by officials within the JCPS as

one of the major contributors of ongoing criminal activity as well as lack of trust and confidence in the system by the community – Compile a baseline report with detailed data for the 2009/10 financial year

• Output 5: Investor perception trust and willingness to invest in South Africa is improved and by taking corruption related action in a defined number of highly visible cases– Successfully convict 100 people who have assets of more than R5 million

obtained through illicit means

Outcome 12: Efficient, effective and development oriented public service and an empowered, fair and inclusive citizenship

• Output 4 – Corruption tackled effectively.– An improvement in the TI corruption index from position 55 of 180 to 40 of 180.


Links to government outcomes

Externally focused1. To increase impact of the SIU’s forensic services in the public sector2. To achieve optimum institutional form3. To ensure excellent cooperation with our law enforcement partners and

stakeholders

Impact• Strengthen our strategic partnerships • Increase the scope of operations for the SIU• Contribute directly to:

– Outcome 3: South Africans are and feel safe– Outcome 12: Efficient, effective and development oriented state


Strategic objectives

Internally focused 1. To secure appropriate capacity and funding2. To align and improve systems and processes3. To invest in appropriate technology capacity4. To build an engaged, diverse and competent SIU5. To develop effective, accountable and engaging leadership

Impact• Enables the SIU to achieve its external objectives


Strategic objectives

Strategic Overview – 3 years

2009/10• Environment uncertain with recession and large dependence on partner funding • Concluded most of an intensive OD process to better capacitate the SIU• Adopted a 3 to 5 year approach to strategic planning• Key focus on positioning the SIU as the forensic service provider to the state

– and increasing projects and funding 2010/11• SIU becomes part of new government initiatives on corruption

– ACTT, MAWG, DPSA– significant increase in impact, workload and funding– focus of investigations shift to procurement

• Align strategic plan with the Results Based Management and Outcomes Management approach of government and develop a Logic Model that links the work of the SIU to Outcome 3 (Outputs 3 & 5) and Outcome 12 (Output 4)

1031 March 2011 SIU presentation to PC on Justice and Constitutional Development

Building capacity through partnerships

• The major focus of the SIU has been to build more capacity in the state to deal with corruption investigations:• has grown from about 67 to 600 staff in 9 years • trainee investigator program to address EE challenges in the industry

• The new operating model is designed for scalability – will allow for rapid increase investigator numbers in response to the increased demand

• SIU has also sourced additional forensic investigators from the private sector• intended as short term intervention and skills transfer initiative.• allow time to recruit and develop staff• cater for some of the uncertainty from our funding model

• The recruitment and development initiatives intended to provide long term capacity that is sustainable and helps to transform the industry


ACTT (Anti Corruption Task Team) in the Justice Cluster• Task team set to fast-track high priority corruption investigations and prosecutions,

– and to co-ordinate efforts with other bodies. • Consists of the Hawks, SIU, and NPA (including prosecutors and the AFU)

– supported by SARS, the FIC and the Accountant-General in Treasury• SIU has committed considerable resources to this process

MAWG (Multi Agency Working Group on procurement) in the Finance cluster• To deal with irregularities in the government procurement system, focusing on closing systems

gaps and detecting and investigating irregularities• The Accountant-General, SARS, FIC, DPSA and SIU – supported by Hawks and NPA• SIU has played a significant part in the development of strategy and implementation

Wasps (Special Anti-Corruption Unit in DPSA) - in the Governance cluster• It will focus on the investigation and prosecution of disciplinary cases against senior public

servants involved in corruption to ensure that effective action is taken.• It will work with departments to do so• The SIU has committed to provide it with the investigative and legal support

1231 March 2011

Participation in other initiatives

SIU presentation to PC on Justice and Constitutional Development

SIU performance overview

31 March 2011 13

07/08 08/09 09/10 10/11 11/12 12/13 13/14 Cash recoveries (Rm) R61m R72m R69m R75m R30m R35m R40m Savings for financial year (Rm) R301m R202m R12m R12m R30m R35m R40mPrevention of future losses (Rm) R2 672m R4 917m R197m R185m R200m R210m R220mEvidence prepared for: - criminal action 4 495 5 545 5 350 4 000 2 000 2 000 2 000

- other remedial actions (cancell driving licences, social grant,etc)

139 331 198 052 50 357 45 000 3 000 2 000 2 000

- disciplinary action 8 627 4 750 3 870 2 500 2 500 3 500 4 000 - civil litigation (acknowledgem of debt signed,etc)

9 696 11 177 9 843 9 000 2 500 3 500 4 000

Contributing to completed investigations for JCPS output 5

0 0 1 4 20 30 30

Value of procurement matters where irregularities found (Rbn)

n.a. n.a. n.a. n.a. R20bn R25bn R30bn

SIU presentation to PC on Justice and Constitutional Development

• There has been a significant change in focus in service delivery, from multiple small cases to fewer complex, long term investigations into procurement.

• Essentially it will mean the SIU deals with fewer but more important cases • This coincides with the new focus of government on procurement irregularities

– Social grants: shift from grants to procurement issues, SIU phasing out • There is still one significant removal possible but probably not this year

– Housing: shift from illegal subsidies to housing contracts– Transport: agreement has not been renewed

• Impact on performance as measured currently– Financial indicators will decrease in short term as it will take longer to deliver– Number indicators: will also decrease but not as significantly

• 2 new indicators to try to measure impact – contributing to completed investigations for JCPS output 5 – value of contracts where irregularities found


Analysis of performance

New Proclamations 2010 /11

• 16 new Proclamations this year – the most ever in a single year:1. Public Works (national) 2. Rural Development and Land Reform (national) 3. SAPS procurement division 4. SABC 5. Arts and Culture 6. National Heritage Council 7. Gauteng Health8. Eastern Cape Education9. KZN Public Works 10. North West Municipalities – all 11. Tshwane Metropolitan Municipality12. Ekurhuleni Metropolitan Municipality13-16 George, Stellenbosch and Oudtshoorn Local Municipalities in WCP

• 2 Proclamations to extend ongoing investigations: – SASSA, Human Settlements


Operations

SAPS• Assistance to PP only one part of a far wider investigation, commenced at the

request of the current National Commissioner when he took office• A major concern was significant irregularities in the SAPS build programme with

allegations of SCM irregularities in the building and/or renovation of 33 police stations exceeding R330 million:– lowest quotations not accepted– no quotations from the winning bidder– possible cover quoting and BEE fronting– possible conflicts of interest - SAPS officials appear to have interests in the

suppliers awarded work for goods and services– actual payments exceeding budgeted costs

• Agreed priorities are the following building and/or renovation projects :– Pienaar Police Station; Hazyview Police Station; Brighton Beach Police

Station; eSikhawini Police Station.


Operations

Public Works• Looking at entire DPW function, is a core state entity and vulnerable• At least R35m paid to entities where DPW staff have undeclared business interests• Contract for construction of accommodation at border post:

– value of contract is R374m – Investigating maladministration, financial misconduct and corruption on part of

senior DPW officials and contractor– Looking to civil recovery of about R46m as well as other action

• Pretoria lease agreement for residential accommodation at approx R217 000 pm without relevant approval and contract value to date exceeds R7m– Contractor has been positively linked to DPW official


Arts and Culture• Looking at misuse of funds ring-fenced for 2010 Soccer World Cup• Investigation revealed:

– R26m moved from earmarked SWC budget – unauthorised expenditure– R16m not used for SWC-related projects. Also unauthorised expenditure

SABC• SABC approached SIU for assistance• AG investigation which identified 20 employees whose business interests received

payments totaling R 3.4m in period 1 Oct 07 – 30 June 09• SIU has identified another 20 employees whose business interests received payments

amounting to R 2.4 billion in period 1 Sept 07 – 31 March 10• SIU worked jointly with the Brixton Commercial Crime Unit on 8 criminal matters• 5 matters have been finalised and are to be submitted to the NPA for a decision by the

Commercial Crimes Unit


Operations

Tshwane Metro• Identified 65 officials who have interests in companies doing business with the

Metro and receiving payments as active vendors– Total payments made to these businesses between 2007 and 2010 is R185m

• Total value of procurement under investigation in excess of R80m• Irregularities include:

– Deviation approvals of over R400m– Collusion between officials and service providers– Deviations from tender specifications without authorisation– Payments to service providers for work not complete or services not rendered.


Operations

Ekurhuleni Metro• Reviewing 10 waste management tenders involving 19 contractors – total value of

contracts in excess of R500m– In 1 contract, payments of R37.8m were made to service provider without

delivery notes – No-one at Metro can confirm whether goods were delivered

• ICT contracts– Contract to value of R32 million awarded to company with which Exec Director

IT had an undisclosed relationship. He has since resigned and is now employed full-time by the company.

– Director: Infrastructure admitted to signing off on invoices to value of R 12.4m for services that were not delivered.


Operations

Rural Development and Land Reform• Latest proclamation, requested by the Minister, covers the following areas:

– The application for and award of grants and funds and the administration thereof by the Department, under the land reform programme, in a manner that was contrary to legislation and guidelines, or fraudulent

– The incurrence of irregular expenditure; fruitless and wasteful expenditure; and/or expenditure not due, owing and/or payable in relation to beneficiaries, consultants, and/or service providers in relation to the land reform programme of the Department.

• Has resulted in SIU’s biggest ever data uplifting project, involving over 50 million printed documents being identified, catalogued, scanned and analysed

• Have already worked with Hawks and AFU to:– 3 officials and a KZN businessman, on fraud and corruption charges relating to

the irregular awarding and administration of land reform grants totalling R50m– Seize several KZN farms and assets worth about R50m to date


Operations

Operations

Department of Human Settlements• One of SIU’s longest running projects in cooperation with the National Department. • New focus is on construction contracts• A review of the Housing Subsidy System indicated at least 50% of all projects are

problematic in some way. Contractors paid for building houses which may– Not exist at all– Be extensively incomplete– Be seriously defective– Not correspond to the numbers agreed to (paid for building more houses than

was the case)• Currently focusing on 20 “top cases” drawn from all provinces, identified in

cooperation with Department.• Total value of contracts under investigation is over R2 billion


SIU challenges in dealing better with corruption

• PFMA – powers of Accounting Officers – control over investigation, disciplinary action, civil litigation, referral for criminal action, recommendations not implemented– Another is the need for better coordination of the many new initiatives

• Can SIU model be made more effective and sustainable?– AGSA type model where Depts have to pay for work to be done – perhaps NT assists where not sufficient funds – Approaches to SIU is often not pursued for financial reasons, sometimes

money may just be an excuse • Amendments to SIU Act – in Judicial Matters Amendment Act

– Unable to use civil litigation effectively as envisaged in Act - deal with locus standi and other issues

– Delays have restricted impact of SIU


Personnel information

• Establishment is 668 funded posts.– expect to grow to 706 in next 3 years – about 40% is dependent on project funding which make permanent

employment risky– have tried to mitigate somewhat by using consultants, contract and temporary

staff – now more certainty on project funding - on aggressive recruitment drive

• Permanent posts filled decreased due to uncertainty about project funding– 594 in 2007/08 to 522 in 2010/11

• Challenges due to cumbersome process of salary approval on which implementing the new organisational structure depends

• SIU has negotiated an innovative agreement to in-source forensic investigators from the private sector to assist with workload as 50% of AG rates


Budget growth and projects income

01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11R’m R’m R’m R’m R’m R’m R’m R’m R’m R’m

NT grant 21 23 26 37 49 56 103 116 155 171

Projects 0 0 15 22 53 83 129 132 114 142

Total 21 23 40 60 102 138 232 248 269 320Projects as % of Total

0% 0% 37% 37% 52% 60% 55% 53% 42% 44%


• Huge overall growth in income from R21m in 2001/02 to R320m this year • Massive increase in funding from projects to 60% of total income, then decline• SIU vulnerable when there is decline as during recession as many staff employed • In past 2 years, aggressive savings: reducing accommodation & car rentals

costs, limit telephone use and recovering all private call costs

Special Investigating Unit: Financial information

R thousand Audited outcome Revised estimate Medium-term estimate

Statement of financial performance 2007/08 2008/09 2009/10 2010/11 20011/12 2012/13 2013/14RevenueSale of goods and services 128 489 131 622 114 120 141 754 150 259 161 517 171 208

Other non-tax revenue 5 854 9 692 7 733 1 396 1 438 1 525 1 616 Transfers received 103 113 116 297 154 737 171 089 193 620 202 810 218 504

Total revenue 237 456 257 611 276 590 314 239 345 318 365 852 391 329 ExpensesCompensation of employees 138 298 164 292 182 060 193 919 213 085 235 188 256 329

Goods and services 50 483 85 142 84 802 96 473 104 304 102 098 104 408

Depreciation 6 968 5 443 10 859 10 669 13 686 14 012 14 475

Interest, dividends and rent on land 3 306 5 799 5 099 - - - -Total expenses 199 055 260 675 282 821 301 062 331 074 351 299 375 211 Surplus / (Deficit) 38 401 (3 064) (6 231) 13 177 14 243 14 554 16 117

Financial Information


Expenditure trends

Funding for the SIU• transfer from the Department of Justice and Constitutional Development• revenue generated from charging institutions fees for some of its investigations2011 Estimates of National Expenditure• Revenue: up by an average of 9.8 % pa, from R238m to R314m (07/08 to 10/11):

– projected to increase by an average of 7.6% pa to R391 million by 13/14• Growth mainly due to additional allocations received for increased pcapacity• Expenditure: increased 14.8 % pa, from R199.1m to R301.1m (07/08 to 10/11)

– projected to increase to by an average of 7.6% pa to R375.2m by 13/14• Increase largely from personnel expenditure and increase of investigative capacity• Significant us of consultants assisting with organisational redesign process in 08/09

• 2011 Budget: small additional allocations for investigative capacity and inflation:– R15.6 million in 2011/12– R21.5 million in 2012/13– R27.2 million in 2013/14


Conclusion

• SIU has made considerably more impact in past 2 years • There is a massive increase in demand for assistance to address corruption from

government and state institutions • Capacity to deal effectively with investigations remain a challenge • Partnerships with other government institutions through initiatives like ACTT,

MAWG & Wasps have started to improve coordination

2831 March 2011 SIU presentation to PC on Justice and Constitutional Development

Finally

Questions


siu presentation to portfolio committee: justice and constitutional development 31 march 2011

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