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PRESENTATION TO THE PORTFOLIO COMMITTEE FINDINGS OF THE SPECIAL INVESTIGATING UNIT ON THE SABC

PRESENTATION TO THE PORTFOLIO COMMITTEE FINDINGS OF THE SPECIAL INVESTIGATING UNIT ON THE SABC. 18 February 2014. Introduction.

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PRESENTATION TO THE PORTFOLIO COMMITTEE FINDINGS OF THE SPECIAL INVESTIGATING UNIT ON THE SABC

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  1. PRESENTATION TO THE PORTFOLIO COMMITTEE FINDINGS OF THE SPECIAL INVESTIGATING UNIT ON THE SABC 18 February 2014

  2. Introduction • The Portfolio Committee on Communications requested the Auditor-General of South African (AGSA) in 2009 to investigate allegations of fraud, corruption, mismanagement of funds as well as all other breaches of corporate governance at the SABC. • The President of the Republic in terms of Proclamation R58 of 2010, as published in Government Gazette 33718, dated 29 October 2010, mandated the SIU to conduct an investigation into allegations of mismanagement and/or misconduct by the SABC Board, • officials and/or employees and any other 3rd parties. • The Department has been advised that, post 18 September 2012 meeting with the PCC, the SABC appointed Bokwa Attorneys to consider and advise on implementation of the findings of the SIU report. • The SIU referred certain matters to other authorities for further investigation and/or prosecution between 2009 and 2012.

  3. INVESTIGATIONS • The SIU investigated the following cases in which criminal charges have been laid: • Case 1 – International acquisition – Allegations of receipt of kickbacks for international content acquisition. A criminal case has been opened at Brixton police station. • Case 2 – The SABC entered into two different contracts for the same campaign. • A criminal case was opened at Brixton. • Case 3 - Allegations of abuse of position of employee to benefit a business in which his wife held an interest and failure to declare interest. A criminal case has been opened.

  4. INVESTIGATIONS • Case 4 - Allegations of abuse of position as senior manager to outsource work to certain • firms and making grossly inflated payments and payments for work not done. • A criminal case has been opened at Brixton. • Case 5 – Allegations of company submitting fictitious invoices to the SABC and received payments from SABC without actually rendering required services. • A criminal case has been opened at Brixton. • Case 6 – Allegations that an individual misrepresented details contained in the cue-sheets and claimed royalty payments based on these cue-sheets. • A criminal case has been opened at Brixton.

  5. CRIMINAL MATTERS • Case 7 – Procurement of certain gifts warranted further investigation. • A criminal case was opened and is under investigation by Specialised Commercial Crimes • Unit (SCCU) and the SAPS at Brixton. • Case 8 – This company allegedly claimed to be a registered vendor and claimed VAT while not a registered VAT vendor. A criminal case was opened and is under investigation by SCCU and SAPS at Brixton. • Case 9 – The SABC allegedly provided airtime of R900 000 for a campaign of which only R300 000 was invoiced thus effectively granting a discount of R600 000. • A criminal case has been opened and is under investigation by SCCU and SAPS under at Brixton. • The attorneys recommended that the SABC should follow-up on these matters to establish progress and status update in respect of each matter. The SABC may also have civil claims against each of the entities and/or individuals referred to above. There are also other matters in relation to which the SABC may consider instituting civil proceedings, depending on the evidence at its disposal.

  6. Fruitless and Wasteful and Irregular Expenditure • INVESTIGATION • The SIU investigated fruitless and wasteful and irregular expenditure incurred at the SABC during the period between September 2006 and March 2008 • SOME PERTINENT FACTS • During the period of investigation the SABC had two boards. • One board served during the period 1 January 2004 to 31 December 2007 and the other served for the period 1 January 2008 to 30 June 2009.

  7. Fruitless and Wasteful and Irregular Expenditure • FINDINGS • The SIU established that fruitless and wasteful expenditure of R9.6 million and irregular expenditure of R275.6 million was incurred at the SABC during the period September 2006 to March 2008. • This fruitless and wasteful and irregular expenditure was mainly caused by contracts that were entered into disregarding the approved Procurement Policies and/or Delegation of Authority Framework (DAF). • The SIU concluded that members who served on the two SABC Boards that were in place during this period contravened section 51(1)(b)(ii) of the PFMA in that they failed to prevent fruitless and wasteful and irregular expenditure amounting to R9.6 million and R275.6 million respectively.

  8. Fruitless and Wasteful and Irregular Expenditure (cont’d) • FINDINGS • In terms of section 86(2) of the PFMA the board members, as accounting authority, were liable to be criminally prosecuted if the board wilfully or in a grossly negligent way failed to comply with the provisions of section 50, 51 or 55 of the PFMA. • In terms of SIU Act, the SIU referred the matter to the SCCU for further investigations, as evidence exists which points to the commission of criminal offence in terms of section 86(2) of the PFMA.

  9. Fruitless and Wasteful and Irregular Expenditure (cont’d) • SIU RECOMMENDATIONS: • Actions be instituted against the former members of the Board for financial misconduct committed in terms of section 83 of the PFMA • This section of the PFMA stipulates that “The Accounting Authority for a public entity commits an act of financial misconduct if that accounting authority wilfully or negligently makes or permits an irregular expenditure or a fruitless and wasteful expenditure”. • The matter was referred to the SCCU for further investigations, as evidence exists which points to the commission of a criminal offence in terms of section 86(2) of the PFMA.

  10. Conflict of Interests • INVESTIGATION • The SIU performed an analysis of the Companies and Intellectual Property Commission against the SABC’s personnel database for the period 1 October 2007 to 30 September 2010 • FINDINGS • The SIU noted that some of the SABC employees failed to disclose their business interests, which constitutes non-compliance with the SABC Personnel Regulations which was punishable by disciplinary actions in terms of section 11(b) of the Personnel Regulations • 698 employees and 32 Board members had business interests in other corporate interests • 36 Board members had a duty to declare their interests and 19 failed to declare their interests (these would have been three different boards).

  11. Conflict of Interests (cont’d) • The SIU found that failure by board members to disclose directorships in other companies constituted a criminal offence in terms of section 216 of the Companies Act 61 of 1973 • 626 employees contravened the SABC personnel regulations in that they failed to disclose their business interests in other entities

  12. Conflict of Interests (cont’d) • SIU RECOMMENDATIONS • The SIU recommended that disciplinary actions be instituted against all employees who contravened the SABC Personnel Regulations • ACTIONS UNDERTAKEN TO IMPLEMENT THE RECOMMENDANTIONS • POST SEPTEMBER 2012 • The SIU sent letters to board members who did not declare their other directorship/s, requesting them to explain their non-disclosure. • The responses obtained from the board members were to be submitted to the SAPS • The SIU referred the matter of the Board to the South African Police Services in accordance with its responsibility in terms of section 4(1)(d) and 4(2) of the SIU Act. • It was found that three Board members were wrongly accused of not declaring their business interests and were cleared.

  13. Conflict of Interests (cont’d) • With regard to the rest of the board members against who allegations have been made • This will have to be pursued further, including through engagement with the Bokwa attorneys.

  14. Revenue Matters • INVESTIGATION • The SIU conducted an investigation into revenue matters referred by the SABC Board • Case 10 - It was alleged that an employee signed and approved a commitment with a company in contravention of the DAF in respect of the period January to • December 2008 and the commitment value was R100 million • Case 11 - It was alleged that the commitment agreements with a company were not in accordance with the SABC’s normal business practices. Two commitments were investigated by the SIU. The total commitments were valued at R22 million. • Case 12 - It was alleged that an employee abused his position at the SABC to indirectly benefit a business in which his wife had an interest.

  15. Revenue Matters • INVESTIGATION • Case 13 – A company rendered services to the SABC, when their agreement expired on February 2008, they continued to render their services without a contract until 28 February 2011. No approval in terms of the DAF was obtained. • For the period 1 September 2010 to 28 February 2011 the services rendered were approved by the Board but was not signed by the company. • Case 14 - A senior manager approved the extension of contracts with four debt collection agencies for 1 April 2009 to 31 March 2010, outside his delegated authority.

  16. Revenue Matters • INVESTIGATION • Case 15 – it is alleged that 2 Companies were irregularly appointed during the Soccer • World Cup. • Case 16 – It is alleged that a company was irregularly appointed to provide refreshments at the launch of the World Cup Event, set-up SABC on-site Public Viewing Areas (PVAs) and set up ten regional PVAs (later reduced to five).

  17. Revenue Matters • FINDINGS • The Board committed an act of financial misconduct for failing to comply with 51(1)(c) of the PFMA in respect of the commitment with Case 10 • The Board committed an act of financial misconduct for failing to comply with 51(1)(c) of the PFMA in respect of the commitment with case 11. • The SIU did not make any finding against the Board in Case 12. • The SABC incurred an irregular expenditure in respect of the period 1 September 2008 and 31 August 2010 in relation to case 13. • In relation to the matter of debt collection agencies, Case 14, the board as an accounting authority committed an act of financial misconduct as it failed to comply with section 51(1)(b)(ii) of the PFMA as there was irregular expenditure of R85.7 million. • The DAF was contravened as the contract in case 15 was not approved at the requisite level and the contract was signed after it became effective and after services in terms of the contract had commenced. Irregular expenditure of R16,8 million and fruitless and wasteful expenditure of R16,8 million was incurred.

  18. Revenue Matters • SIU RECOMMENDATIONS • Case 10 • Action must be instituted against the Board for financial misconduct, current Board must report the financial misconduct of the then Board to Executive Authority and Treasury, disclose irregular expenditure in the financial statements and actions be instituted against the Board in terms of section 86(2) of the PFMA in that it failed to manage revenues amounting to R38 million and failed to comply with section 51 of the PFMA. • Case 11 • Action be instituted against Board members for financial misconduct committed in terms of section 83 of the PFMA, the current Board to report the then Board’s financial misconduct to the Executive Authority and Treasury, report irregular expenditure to Treasury and disclose the same in the financial statements in accordance with Treasury Regulation 28.2.1. Actions be instituted against the Board in terms of section 86(2) of the PFMA in that it failed to manage revenue amounting to R2.1 million and failed to comply with section 51 of the PFMA. • Case 12 • No recommendation made against the Board, Unauthorised, irregular and excessive expenditure, resulting in a potential loss to the SABC of R838 640. A criminal case referred to Brixton Police Station.

  19. Revenue Matters • Case 13 • Actions be instituted against the SABC board members for financial misconduct committed in terms of section 83 of the PFMA, the SABC report the PFMA non-compliance and financial misconduct to the relevant executive authority and actions be instituted against members of the SABC board in that they made or permitted irregular expenditure of R25.6 million • Case 14 • Action be instituted against the board of the SABC in terms of section 82(2) of the PFMA in that it made or permitted irregular expenditure amounting to R85.7 million. • Case 15 • The SABC should disclose the irregular and fruitless expenditure in its financial statements in accordance with Treasury Regulation 28.2.1. The SIU did not recommend any action against the then Board .

  20. Revenue Matters • Case 16 • The SABC should disclose the irregular and fruitless expenditure in its financial statements in accordance with Treasury Regulation 28.2.1. • The SIU did not recommend any action against the current Board. • ACTIONS UNDERTAKEN TO IMPLEMENT THE RECOMMENDATIONS • POST 18 SEPTEMBER 2012 PCC MEETING • The SABC appointed a firm of attorneys to advise on how to take the recommendations of the SIU forward as they pertain to revenue matters. However, there are debates about the value of the Bokwa Report. For purposes of providing all points of view we refer to their proposals below. • Case 15 • The attorneys advised that the Board had taken all the steps that were expected or required of them in discharging their responsibilities in terms of section 51 of the PFMA. Consequently no action is to be taken against any board member. They also advised that this matter be disclosed in the financial statements to the extent that this has not been done already.

  21. Revenue Matters • Case 16 • The attorneys advised that the Board had taken all the steps that were expected or required of them in discharging their responsibilities in terms of section 51 of the PFMA. Consequently no action is to be taken against any board member. They also advised that this matter be disclosed in the financial statements to the extent that this has not been done already.

  22. Revenue Matters • Case 10 • The attorneys advised that the SABC Board had discharged its responsibilities as required in terms of section 51 of the PFMA . Consequently there is no ground for taking actions against any of the members of the Board based on financial misconduct arising out of this transaction. They noted that the transaction took place before the current board was appointed and that there is a need to conduct further investigation of the role of the previous board in relation to the transaction. • Case 11 • The attorneys advised that the current Board was not in control of the affairs and management of the SABC at the time. It would appear that only an individual was part of the previous Board of the SABC. To the extent that there was any loss, then such loss should be disclosed, if it has not been disclosed already, in accordance with the provisions of Regulation 28.2.1 of the National Treasury Regulations There is, however, a need to conduct a further investigation of the role of the previous SABC Board, which dealt with this transaction.

  23. Revenue Matters • Case 13 • The attorneys advised that action be instituted against the SABC Board members at the time, which include the SABC Board members (2010 – 2013), for financial misconduct committed in terms of PFMA, section 83. • The current SABC Board report the PFMA non-compliance and financial misconduct to the relevant executive authority and treasury as required in terms of section 51(2) of the PFMA. Actions be instituted against the members of the SABC Board, • at the time, in terms of section 86(2) in that they made or permitted irregular expenditure amounting to R25.6 million. • Case 14 • The attorneys advised that the SABC Board applied its mind in relation to these transactions. It follows that there cannot be a basis for a financial misconduct charge in terms of the relevant provisions of the PFMA against the Board. The SABC Board (i.e. 2010 – 2013) complied with the provisions of section 51(1)(e) of the PFMA. Bokwa Attorneys therefore differ with the SIU’s findings and recommendations regarding debt collecting transactions especially in light of the information that was provided subsequent to initial report.

  24. Security Benefits • INVESTIGATION • The SIU investigated all security costs paid by the SABC for Board members during the • period 1 July 2009 to 31 March 2010. • FINDINGS • During its investigation, the SIU was provided with an excerpt of a board meeting dated 3 May 2004 which made reference to a policy approved by the Security Sub-Committee of the previous Board on the provision of security for the Chairperson, Deputy Chairperson and the GCEO. • No policy could be provided to the SIU by the SABC. The SIU further identified that the SABC does have a “Home Security Equipment” Policy dated August 2002. This policy however entitles qualifying recipients to specific security equipment and not security in the form of guards. • The SIU found personal security in the form of house guards that was paid by the SABC as follows during the period 1 October 2007 to 31 March 2010:- • Former Chairperson = R140 480.70 • Former GCEO = R181 152.32 • Former Acting GCEO = R 88 898.14

  25. Security Benefits • SIU RECOMMENDATIONS • The matter must be referred to the SARS for further investigation for possible contravention of the Income Tax Act of 1962.

  26. Air Travel • INVESTIGATION • According to the AGSA Reports income tax was not deducted on the benefits received by delegates who were accompanied by their partners to the Beijing Olympics. All travel and related costs paid by the SABC for the partners of employees and/or Board members on both local and international trips in the period 1 April 2008 to 31 March 2010 were identified and quantified. • FINDINGS • According to the SIU Report 14176 (figure extracted from the SIU Report)air tickets were purchased. 1076 (figure extracted from the SIU Report) of these air ticket purchases were for employees from a General Manager level and above and Board members. • Employees and/or Board members were accompanied by partners on 36 trips. • Employees and/or Board members were accompanied by individuals other than their partners on 12 of the trips

  27. Air Travel • For 2 of these trips, the employee and/or Board member was accompanied by a child; • and • The remaining 10 trips related to a former Board member who travelled with an assistant. • For 4 of these trips, her assistant was her child. For 1 of these trips, she travelled with both her assistant and her child • Where employee and/or Board members were accompanied by individuals other than their partners, it is not in compliance with the SABC’s travel policy • .

  28. Air Travel • In the specific case of a Board member who is wheelchair bound and she had to travel • with an assistant as a matter of necessity. • Two instances were identified where costs were paid by the SABC to deliver and collect a child of an SABC employee to and from school while the parent was out of town on SABC work amounting to R1 190.00. The SABC Travel Policy does not entitle employees and/or board members to such a benefit • SIU RECOMMENDATIONS • The SIU recommended that all trips undertaken by board members (with the exception of a specific Board member who is wheelchair bound) on which they were accompanied by a person other than their partners, be investigated further to determine if a claim for recovery of the cost from the board member is warranted. • .

  29. CONCLUSION • This report could not account for all the matters investigated by the SIU as some have been referred to other authorities for further investigation and/or prosecution. • In respect of some other cases, the SABC appointed Bokwa Attorneys to advise, who duly did so. We need to engage further with Bokwa Attorneys to get more information. • There are instances where the report of the attorneys commissioned by the SABC advised that the Board and some individuals should be absolved in respect of certain matters either because new evidence has been brought forward or the initial findings and recommendations were erroneous. • Other matters are reported to have been referred by the SIU to the SCCU and SAPS for further investigation, while in respect of other cases criminal cases have been opened with the relevant authorities. The SIU has been requested to assist in tracking the progress on the cases that were referred to these authorities.

  30. WAY FORWARD • We need to enage further with Bokwa Attorneys to get more information on advice given to the SABC Board. • The current SABC Board will be requested to provide a periodic progress update on implementation of the SIU Report recommendations, especially those dealing with staff members and former board members. • The SIU will be requested to submit a progress report on the cases that they referred to other authorities for further investigation and/or prosecution. • The Department will engage the attorneys to get more information on the matters in which they advised. • The Ministry will get further advice on what action is necessary, and needs to be taken against any former board member • The Ministry will give periodic reports on progress to the Portfolio Committee.

  31. THANK YOU

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