R775m fraud in department that serves KZN’s vulnerable

Published Oct 25, 2016

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Durban - An investigation has uncovered fraud, corruption and maladministration totalling more than R775 million in the KwaZulu-Natal Department of Social Development.

The findings are contained in a damning report, compiled by the provincial Treasury’s internal audit service, which has recommended criminal charges be laid and disciplinary action taken against those implicated.

Accused in the report are department officials and service providers.

It said of the 19 departmental cases referred to the internal audit service for forensic investigation, only 11 had been completed.

Some of the cases - at various stages of criminal investigation and prosecution - entail collusion between officials in the supply chain unit and suppliers, which operated a syndicate of companies.

Non-profit organisations (NPOs) were also implicated in the mismanagement of R691.987m, in eThekwini, Pietermaritzburg, the Midlands and Ulundi regions.

The report has also lifted a lid on a community development practitioner who defrauded an NPO of R34 100 and also awarded R258 709-worth of tenders to her boyfriend, who in turn is implicated in R34 413 in fraud.

It also flagged irregularities in the appointment of officials in the department’s Midlands offices.

A dismissed senior manager now faced forfeiture of his assets by the Asset Forfeiture Unit to the tune of R8m.

“The sheriff has been struggling to locate him to serve the court papers. The department, through the office of the state attorney, has appointed a tracing agent.”

On Monday, department spokeswoman, Ncumisa Ndelu, said the report was an honest reflection that showed the department had not been spared the scourge of corruption and maladministration.

“What is important to us is that the report also shows a significant drop in the number of cases of corruption being uncovered every year,” Ndelu said.

She said that of the R775.2m mentioned in the report, R691m was money mismanaged by NPOs.

“This has led to the department embarking on a vigorous monitoring and evaluation exercise to close all shortcomings identified in our investigations,” she said.

The report, recently tabled before the legislature, also found significant cover quoting in tender processes involving R72.8m, where service providers operated a syndicate of companies that were related to each other.

“One of the service providers has been paid about R24m by the department. Our preliminary investigation on this company indicates that the company was paying kickbacks to an official,” the report said.

“The lifestyle of the official proved to be excessive,” the report said.

It also said disciplinary action was recommended against five officials and a further criminal cases against five officials, two “outsiders” and implicated service providers.

“Fifteen people were arrested, of which two were officials. The matter relating to one official has been set for trial,” said the report about the criminal charge that was opened in 2010.

It also said disciplinary hearings against three officials had been completed and dismissal was recommended while another official resigned when investigations were under way.

The report said a civil case had been recommended to recover R684 685 in irregular tender processes in the procurement of R1.6m goods at Siyathemba Child and Youth Care Centre as well as a disciplinary hearing against four officials.

Dale Schonewolf, chairwoman of the KZN Welfare, Social Services and Development Forum, which represents 250 NPOs across the province, said she was shocked to hear of the findings of the report this morning.

“I have just been talking to the task team and none of us are aware of the report. It is very concerning to us because it is a bad reflection on the NPO sector as a whole when 90% of NPOs are above board and very fastidious about the way they manage their finances,” she said.

“We have absolutely no objection to them giving emerging organisations funding but it needs to be given to organisations that are capacitated to manage their funds,” she said.

The forum earlier raised concerns that department officials had told NPO managers in face-to-face meetings that they were about to implement budget cuts.

However, the department had denied it was to implement budget cuts saying it was “rationalising services”.

Daily News

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