LOCAL GOVERNMEMENT IN THE 21 ST CENTURY PROGRAMME FOR THE FRAUD, CORRUPTION AND ETHICS SESSION

1. LOCAL GOVERNMEMENT IN THE 21ST CENTURY PROGRAMME FOR THE FRAUD, CORRUPTION AND ETHICS SESSION 12-14 June 2012 • Panel Discussion: • Corruption in Global and National Context • Mr T Mthethwa • PUBLIC PROTECTOR OF THE REPUBLIC OF SOUTH AFRICA • 12 JUNE 2012

2. “The public sector, like all of society and the world, is a mixed bag of humanity. This mixed bag contains persons of little virtue and persons of virtue. The reality is such that the public sector is no more and no less unethical than the rest of society. But because the public sector is constituted of people and institutions that hold public trust... (it) must and does make that extra effort to maintain the integrity of its internal operations. “ Report on proceedings of the THIRD ANTI-CORRUPTION SUMMIT

3. Outline of Presentation • Introduction: Public Protector part of National Integrity Framework 1.1 Constitutional mandate 1.2 Public Protector’s Key Mandate areas 2. Corruption as a Global Concern 2.1 International corruption perceptions and transparency map 2.2 National perceptions on Local Govt Fraud and Corruption 2.3 AG Consolidated Local Government audit outcomes -2009/10 2.4 Service delivery and governance problems in municipalities 2.5 Major reasons for fraud and corruption 2.6 The impact of fraud and corruption • International and Regional Anti-Corruption Standards/ Responses 3.1 A comprehensive policy and regulatory framework is in place: • GENERIC INTEGRITY FRAMEWORK • SPECIFIC INTEGRITY FRAMEWORK FOR LOCAL GOVERNMENT 3.2 Policy and regulatory framework: Implementation gaps 3.3 National Anti-corruption Forum 3.4 Local Government Anti-Corruption Strategy 4. Role of the Public Protector in promoting Integrity as the Foundation of Good Governance

4. The Public Protector is part of the broader National Integrity Framework • The Public Protector South is national Ombudsman like institution , established under section 181 of the Constitution, which forms part of the national integrity framework. • Part of a network of oversight and accountability bodies that include the Auditor-General, Public Service Commission, the Judiciary, Financial Intelligence Centre, Legislature, media and society. • Important role in enforcing Democratic values of good governance, and the Rule of Law And quality of life. • A civil law innovation in a common law legal system, its enforcement powers are non-judicial. • Swedish origins (202 years)with national resonance with traditional institutions such as the Venda Makhadzi (see cover page).

5. Constitutional Mandate • Established under chapter 9 of the Constitution, the Public Protector has the power under section 182 of the Constitution to strengthen and support constitutional democracy by: • investigating any conduct in state affairs, or in the public administration in any sphere of government, that is alleged or suspected to be improper or to result in any impropriety or prejudice; • to report on that conduct; and • to take appropriate remedial action. • Mandate covers all organs of state at national, provincial and local levels, including local government and extends to state owned enterprises, statutory bodies and public institutions. Court decisions are excluded. • Section 182(4) enjoins the Public Protector to be accessible to all persons and communities • Supreme Court Judge rank with stringent appointment and impeachment procedures, which include an open Parliamentary process culminating in presidential appointment for a 7 year fixed term following a 60% majority vote in Parliament and impeachment similar to judiciary. • Nationals and non-nationals may approach. No need for direct prejudice/injustice>

6. Six(6) Key Mandate Areas The Constitution anticipates mandate expansion through legislation, and legislation passed since establishment 15 years ago has resulted in the Public Protector being a multiple mandate agency with the following 6 key mandate areas: • Maladministration and appropriate resolution of dispute the Public Protector Act 23 of 1994(PPA). The maladministration jurisdiction transcends the classical public complaints investigation and includes investigating without a complaint and redressing public wrongs(Core); • Enforcement of Executive ethics under by the Executive Members' Ethics Act of 1998(EMEA) and the Executive Ethics Code (Exclusive): • Anti-corruption as conferred by the Prevention and Combating of Corrupt Activities Act 12 of 2004 (PCCAA) read with the PPA(Shared); • Whistle-blower protection under the Protected Disclosures Act 26 of 2000. (Shared with the Auditor General and to be named others; • Regulation of information under the Promotion of Access to Information Act 2 of 2000;(PAIA) and • Review of decisions of the Home Builders Registration Council under the Housing Protection Measures Act 95 of 1998.

7. OTHER MANDATE AREAS Transversal investigative powers acknowledged in sector specific legislation, including the following: • Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000; • National Energy Act 40 of 2004; • Special Investigation Units and Special Tribunals Act 74 of 1996; • National Environmental Management Act 108 of 1999; • Gauteng Petitions Act. Non-investigative functions conferred by legislation such as: • Public Finance Management Act 1 of 1999; • Lotteries Act 57 of 1997; • National archives and Record Service Act 43 of 1996; and • Electoral Commission Act 51 of 1996.

8. INSTITUTIONS WITHIN JURISDICTION The Public Protector’s oversight jurisdiction covers more than 1000 organs of state and government agencies operating at all three levels of government, including local government. Public institutions and bodies performing a public function are also included.

9. Corruption as a Global Concern • “Corruption Is World’s Most Talked About Problem” (together with environmental issues, global economy, unemployment, poverty and terrorism) (BBC World Service Poll) • Since the mid-1990s the General Assembly of the United Nations has expressed serious concern about the problems and threats posed by corruption to the stability and security of societies, undermining the institutions and values of democracy, ethical values and justice, and jeopardizing sustainable development and the rule of law. • Corruption in public procurement is the primary cause of poverty in Africa, fostered by poor governance and weak legislation. According to World Bank and African Union surveys, public procurement corruption costs Africa$148-billion a year and worldwide it is estimated to be $390-400 billion per year. (Preventing Corruption in African Procurement, Professor AwadiSadikiMawenya, Number 9, August 2008) • Corruption has enormous negative consequences. It diverts public funds into unnecessary, unsuitable, uneconomic and actually, “undemocratic” projects with the primary objective to serve the interests of a few individuals at the expense of the country and its citizenry.

10. Corruption as a Global Concern AlixPartners 2012 Global Anti-Corruption Survey

11. The corruption map of the world Transparency International's transparency index

12. National perceptions on Local Government fraud and corruption 2009 Good Governance Survey Consolidated Report (Nkangala DM) • (73.2%) reported nepotism most common form of corruption • Other forms of corruption include tender irregularities • Maladministration and signing of cheques without appropriate controls • mal-administration or misuse of council property • 50% believe that cases of corruption go unreported - lack of faith in the municipalities’ ability and willingness to act on reports of corruption • 44.1% of members cited fear of reprisals as reason for not reporting • 48.4% of the members believe that there are no consequences for those convicted of corruption • Only 37% of the members believe that councillors are committed to improving the quality of life of the residents – 47, 2% believe put party interests before the interests of the community. 53.9% of the members hold the view that councillors abuse their positions for personal gain

13. AG Consolidated Local Government audit outcomes -2009/10 • Only five of the 283 municipalities had a completely clean audit – this was up from 2 in 2008/09. 110 qualified audits (with 53 of those issued with a disclaimer.) 120 with matters of emphasis • non-compliance with laws and regulations for municipalities were:▪ Transversal material misstatements▪ Expenditure was not paid within the parameters set by legislation▪ Supply Chain Management (SCM) resulting in irregular expenditure▪ Mayor/Accounting Officer / Officials not adhering to statutory responsibilities▪ The Audit Committee was not properly established or functioning ▪ The Internal Audit Unit was not properly established or functioning • unauthorized expenditure - R5 billion in 2009/10-(-R3,03 billion 2008/09). • irregular expenditure - R4,14 billion In 2009/10 (R2,4 billion in 2008/09). • Fruitless and wasteful expenditure -R128 In 2009/10 (R189 million 2008/09).

14. Service delivery and governance problems inmunicipalities • Service delivery and backlog challenges, e.g. housing, water and sanitation; • Poor communication and accountability relationships with communities; • Corruption and fraud; • Poor financial management, e.g. negative audit opinions; • Number of (violent) service delivery protests; • Weak civil society formations; • Intra - and inter-political party issues negatively affecting governance and delivery; and • Insufficient municipal capacity due to lack of scarce skills. Source: 2009 - National State of Local Government Assessments

15. Major reasons for fraud and corruption • The Auditor-General’s report has identified a lack of controls, mismanagement and lack of governance principle as the key reasons for the state of despair in municipalities. • Other reasons include- • Override of internal Controls • The improper political and administrative interface • Collusion b/w Employees and 3rd Parties • Poor Internal Controls • Lack of Accountability/ Weak accountability frameworks • Poor physical security • Poor ethical culture and poor values • Poor hiring practice (Filling of vacant positions, nepotism, Cronyism • Weak national and provincial oversight of local government

16. The impact of fraud and corruption • Lost revenue from, and high expenditure as a result of corruption regarding tax and custom levies, licensing fees, traffic fines and fronting on state contracts. • Reduction in productive investment and growth. Widespread corruption provides a poor environment that does not attract foreign investment. • Costs to the public and the poor - diversion of resources from their intended purposes • Loss of confidence in public institutions: erodes stability and trust and it damages the ethos of democratic government- a loss in confidence in public institutions. • Source: Corruption at the local government level: Time to crack the whip by NontandoGuwa-Ngamlana

17. A comprehensive policy and regulatory framework is in place:GENERIC INTEGRITY FRAMEWORK • International: • United Nations Convention against Corruption (UNCAC) • Global Programme against Corruption designed by the Centre for International Crime Prevention (CICP), in collaboration with the United Nations Interregional Crime and Justice Research Institute (UNICRI), • National: Properness, maladministration or integrity violations ethical violations in local government tested against: • Transversally applicable constitutional provisions of the Constitution such as fundamental rights (Bill of Rights, etct) founding values in section 1, principles of public administration in section 195, procurement regulation under section 217 and fiscal prudence guidelines. • Transversal legislation and directives including- • Preferential Procurement Policy Framework Act • Promotion of Access to Information Act • Promotion of Administrative Justice Act • the Protected Disclosures Act • the Prevention and Combating of Corrupt Activities Act

18. Policy and regulatory framework SPECIFIC INTEGRITY FRAMEWORK FOR LOCAL GOVERNMENT • Municipal Finance Management Act, 2003 • The Constitution – sections 53, 152, 195 Chapt 3 & 7 • Local Government: Municipal Structures Act, 1998 • Local Government: Municipal Systems Act, 2000 • Local Government: Municipal Demarcation Act, 1998 • Codes of Conduct for Councillors and Municipal Employees

19. Policy and regulatory framework SPECIFIC INTEGRITY FRAMEWORK FOR LOCAL GOVERNMENT • Codes of Conduct for Municipal Councillors and Staff Members prescribed by Municipal Systems Act • The Code of Conduct for Councillors similar to EMEA Code covers, among others integrity issues, such as councillors : • To perform the functions of office in good faith, honestly and a transparent manner; and at all times act in the best interest of the municipality and in such a way that the credibility and integrity of the municipality are not compromised. • To disclose personal or private business interests. • Not allowed to benefit from any contract awarded by the municipality. • .

20. Policy and regulatory framework: Implementation gaps • Non Reporting/ Ineffective implementation of the Protected Disclosures Act • Limited implementation and adherence to the Codes of Conduct • Non-compliance with the Financial Disclosure Framework • Non-compliance with the Minimum Anti- corruption Capacity Requirements • Supply chain management prescripts are not adhered to • Weak enforcement and inconsistent application of disciplinary measures • Resignation and transfer before disciplinary processes finalised Source: Public Sector Integrity Management Framework

21. RESPONSE: National Anti-corruption Forum (NACF) • South Africa has an anti-corruption coalition comprised of the Business, Civil Society and Public Sectors. The purpose of the NACF is: • To contribute towards the establishment of a national consensus through the co-ordination of sectoral strategies against corruption; • To advise Government on national initiatives on the implementation of strategies to combat corruption; •  To share information and best practice on sectoral anti-corruption work; •  To advise sectors on the improvement of sectoral anti-corruption strategies.

22. RESPONSE: Local Government Anti-Corruption Strategy • Focus on the Organisation( Effective implementation of Codes of Conduct, systems, policies and procedures, sound internal controls to prevent and detect unethical conduct, fraud and corruption, risk assessment and management, Internal and External Audit; and physical and information security management). • Focus on Employees (Vetting, Induction Programmes, Obligatory Leave Periods, Exit Procedures, Control Assets) • Focus on other Stakeholders • Enforcement (Reporting and monitoring of allegations of unethical conduct, fraud and corruption, Whistle-blowing) • Implementation(Ongoing maintenance and review, Ensuring a coordinated implementation effort, Raising awareness on good governance that includes communication on the anti-corruption work)

23. Other responses to improve Governance in Local Government • Govt’s 12 outcomes: OUTCOME 9: A Responsive, Accountable, Effective and Efficient Local Government System • Local Government Turnaround Strategy: Implementation Framework: ‘Local Government is Everybody’s Business” • 13 immediate pre 2011 priorities • 13 medium term 2011- 2014 priorities • To be managed through establishment of arrangements for • Institutional Structures • Mobilisation of resources and stakeholders • Support for LGTAS priorities • Monitor, report and learn • Operation Clean Audit 2014 -launched on August 2009 • The goal is that by 2011, no municipality or provincial government department will have a disclaimer or an adverse audit opinion; and by 2014 none should have those or a qualified audit

24. Focus Areas to Address Fraud andCorruption • Training of management & staff • Implement and enforce Risk Management and Fraud Policies • Implement and enforce of IT Policy (Internet Use) • Promotion of ethical conduct and good business Practices- corporate code of conduct/ethics • Whistleblower policy • Review and/or improve internal controls • Segregation of duties • Improve security measures • Organisational culture • Senior management commitment

25. Role of the Public Protector in promoting Integrity as the Foundation of Good Governance • The Public Protector: • has a reactive and a proactive mandate regarding ensuring that state affairs are conducted with integrity and general good governance • Investigates on the basis of a specific complaint regarding service failure and conduct failure • Has the power to conduct own initiative investigations • May conduct systemic investigations • May also resolve PAIA disputes • Investigate and resolve allegations of improper or dishonest acts or omissions or offences ito Prevention and Combating of Corrupt Activities Act

26. Investigation/ Intervention Triggers

27. Approach to Investigations? • To pronged approach which seeks to verify and remedy maladministration and injustice at hand while acting as a catalyst for change to entrench good governance thus ensuring that organs of state habitually get things right the first time. Promptness and rigor balanced. • Options include case resolution or investigation, latter may be simple, complex and/or systemic. Integrity matters are investigated> •  Standard Approach to an Investigation:

28. Approach to Investigations?(cont) • What happened? • Proof on a balance of probabilities achieved through document and explanation requests and interviews or hearings. Forensic investigation and expert opinions, where appropriate. • What Should have happened (Proper)? • Legal and regulatory framework used as benchmarks for standard that should have been complied with • Constitutional provisions (NB entitlements and ethical ethical governance provisions), legislation(including Public regulations and Public Service and Treasury Directives/Guides), policies and other prescripts. • Sector and international good practice

29. Approach to Investigations?(cont) • Is there a discrepancy between the two? • Proper conduct test transcends lawfulness • Gap evaluated to ascertain if constitutes maladministration, unethical conduct or corruption. • Room for genuine mistakes. • Prejudice suffered assessed/quantified. • What is the remedy • In service failure civil remedies underpinned by quest to place complainant or victim of maladministration as close as possible to where s/he would have been but for wrongful state action • In integrity violations disciplinary directives to appropriate authorities and criminal referrals to NPA in terms of section 6 of PPA. Commitment to claw back abused state funds.

30. Typical Integrity Violations Investigated in Local Government • Over 1000 cases investigated each year with over 180 cases relating to allegations of unethical conduct, financial mismanagement, abuse of power or corruption in Municipalities under PPA, PCCAA and PDA. • Key issues involve corruption, abuse of power and abuse of resources in procurement management, allocation of social housing, licencing and traffic regulation, employment opportunities, including Extended Public Work Programmes(EPWP), theft of electricity and municipal billing malpractices as well as enforcement of by-laws Specific allegations typically involve: • Bribery: promise, offering or giving of a benefit that improperly affects the actions or decisions of a public official. • Fraud: actions or behaviour by a public official, other person or entity that deceive others into providing a benefit that would not normally accrue to the public official, other persons or entity. The South African government has invested over ZAR60bn (7,1bn USD) of public funds into the provision of an estimated 2,8m subsidised housing units for low-income beneficiaries. A large number of the cases reported involve the fraudulent allocation of these subsidised houses

31. KIND OF CASES UNDER INVESTIGATION BY THE PUBLIC PROTECTOR c) Abuse of power public officials using entrusted power or authority to improperly benefit another public official, person or entity • Conflict of interest: financial or other private interest or undertaking that could directly or indirectly compromise the performance of a public servant’s duties • Corruption: Entrusted power used for own benefit or gratification, bearing in mind that crruption is a bilateral integrity violation. Irregularities in relation to tender and procurement related matters: *Auditor General SA Consolidated Local Government audit outcomes -2009/10

32. KIND OF CASES UNDER INVESTIGATION BY THE PUBLIC PROTECTOR e) Favouritism: the provision of services or resources according to personal affiliations of a public official. f) Nepotism: public officials ensuring that family members are appointed to public service positions or that family members benefit form procurement processes

33. Workload Tackled Through Collaboration with Local Ombudsman Offices and Integrity Structures • Over 26 000 cases processed per year comprising 20 000 received and about six thousand carried over from previous year. • Population of about 50 million people spread over a vast country with 47 district municipalities and 6 metropolitan districts making up 53 districts serviced by 20 offices of the Public Protector backed by toll free line and mobile office outreach services. Staff compliment of over 300 persons. • Local Ombudsman structures encouraged to be first port of call for complaints. • Integrity and complaints structures for municipal police included. • Collaborative work with fellow integrity institutions such as the Auditor General, Hawks, SIU and PSC employed where deemed appropriate.

34. Conclusion • Local government is at frontline of public service delivery and essential for fulfillment of constitutionally promised quality of life for all people, particularly through delivery on socio-economic rights and Millennium Development Goals(MDGs); • Maladministration and corruption key factors derailing service delivery thus delaying fulfillment of constitutional dream, which includes redressing apartheid imbalances, gender inequalities and other inequalities; with peace undermined hence public protests; • Public Protector’s impact due to sound constitutional foundations, comprehensive legal framework and rule of law ethos, including independence of the judiciary and constitutionally entrenched public accountability; • Integrity efforts form part of national anti-corruption strategy • Role of civil society facilitated by an active media enjoying constitutionally entrenched right to freedom of expression, incorporating freedom of the media has been • Good governance and anticorruption movements, including annual national Good Governance Week. • Institutionalization of principles of accountability, integrity and responsiveness in public service anchored in stewardship service ethos.

35. How Does the Public Protector Get Involved How do you initiate a case? • Cal Toll-free line: 0800 11 20 40; • Visit any of the Public Protector. 20 offices exist across the country divided into : • 1 National Office • 9 Provincial Offices and 10 Regional Offices • Participate in any outreach activity e.g. Mobile Office, clinics, TV or radio programme • Write to the Public Protector 5) Complete a form on the website: www.publicprotector.org or 6) Send an email to regristration2@pprotect.org

36. . THANK YOU Regardless of the above, your initiative gives me and many South Africans hope that local government in this country will turn the corner and deliver the service that our Constitution promises the people. This gathering indicates that there are leaders in this important sphere of government who are committed to democracy by ensuring meaningful service delivery and good governance Utat’ u Madiba, our former President Nelson Mandela stated that - “ Our hope for the future depends on our resolution as a nation in dealing with the scourge of corruption. Success will require an acceptance that, in many respects, we are a sick society. It is perfectly correct to assert that all this was spawned by apartheid. No amount of self-induced amnesia will change the reality of history. But it is also a reality of the present that among the new cadres in various levels of government you will find individuals who are as corrupt as, if not more than, those they found in government. When a leader in a provincial legislation siphons off resources meant to fund services by legislators to the people; when employees of a government institution that was set up to help empower those excluded by apartheid, defraud it for their own enrichment, then we must admit that we have a sick society. This problem manifests itself in all areas of life.”

37. THANK YOU www. pprotect.org