ANNUAL ROUNDTABLE ON THE PROMOTION OF PROFESSIONAL ETHICS IN THE PUBLIC SERVICE

1. ANNUAL ROUNDTABLE ON THE PROMOTION OF PROFESSIONAL ETHICS IN THE PUBLIC SERVICE FINANCIAL MISCONDUCT Date: 26 NOVEMBER 2009

2. Presentation outline • Introduction • Legislative framework • Definition of Financial Misconduct • Statistical overview • Trend analysis of cases reported • Findings and Recommendations • Conclusion 2

3. Introduction • A key pillar of public accountability is the effective, efficient and economic use of public resources. Within the Public Service, there is a proper framework to ensure accountability. • However, a key risk associated with financial management emanates from the human element. Public Servants can be faced with the temptation of enriching themselves and it is therefore of outmost importance that financial management, and especially financial misconduct, be placed under intense scrutiny, and is subjected to rigorous monitoring. • In this regard, an ethics infrastructure comprising of the Code of Conduct for the Public Service, the Financial Disclosure Framework and the National Anti-Corruption Hotline, aims to regulate ethical conduct within the Public Service. Furthermore, Departments are required in terms of the Treasury Regulation 4.3 read with section 85(1)(a) and (e) of the PFMA, 1999, to report finalized cases of financial misconduct. 3

4. Introduction…..cont • In this context, the PSC’s mandate is the promotion and maintenance of a high standard of professional ethics. • In pursuance to this Constitutional mandate, the PSC investigates allegations of unethical conduct by Public Servants. The relevant legislative framework is as follows: LEGISLATIVE FRAMEWORK • Section 195 (1) of the Constitution, RSA, 1996 determines that Public Administration must be governed by the democratic values and principles enshrined in the Constitution, including amongst others, the promotion and maintenance of a high standard of professional ethics

5. Legislative framework • Section 85(1)(a) of the PFMA determines that the Minister must make regulations prescribing the manner, form and circumstances in which allegations and disciplinary and criminal charges of financial misconduct must be reported to the National Treasury, the relevant provincial treasury and the Auditor-General. • Treasury Regulation 4.3 determines that the accounting officer must, as soon as the disciplinary proceedings are completed, report to, amongst others, the PSC on the outcome of the proceedings. • The Prevention and Combating of Corrupt Activities Act (12 of 2004) aims to prevent and fight corruption in the Government and in the Public Sector. Given the above legislative framework, financial misconduct is defined as follows: 5

6. Definition of Financial Misconduct • Any material losses through criminal conduct, unauthorized, irregular, fruitless and wasteful expenditure. The types of financial misconduct reported by departments were categorized as follows: • Corruption, e.g bribery • Financial Mismanagement, e.g failure to follow procurement procedures • Fraud, e.g S&T claim fraud, Social grant fraud • Theft, e.g Theft of laptop, petrol, food, petty cash, cheques • Misappropriation and abuse, e.g abuse of GG vehicle • Gross negligence, e.g loss of state property, unauthorized expenditure The PSC compiles an annual report on the basis of the data collated from the Departments. The statistical overview is as follows:

7. Statistical overview TYPES OF FINANCIAL MISCONDUCT CASES REPORTED 7

8. Statistical overview • SALARY LEVELS OF EMPLOYEES CHARGED WITH FINANCIAL MISCONDUCT 8

9. Trend Analysis • OUTCOME OF CASES OF FINANCIAL MISCOUNDUCT 9

10. Trend Analysis • SANCTIONS IMPOSED IN CASES OF FINANCIAL MISCONDUCT 10

11. Statistical overview • COST OF FINANCIAL MISCONDUCT • The total cost reported by national and provincial departments emanating from unauthorized, irregular, fruitless and wasteful expenditure, as well as losses resulting from criminal conduct reported in respect of the 2007/08 financial year was R 21 776 948.93. • R 8 805 596.00 (40%) of the R 21 776 948.93 was recovered from the employees found guilty of financial misconduct or the financial misconduct did not result in any loss to the State (e.g. a fraudulent Subsistence and Travel claim is not paid). • The high cost of financial misconduct has a negative impact on service delivery as well as the trust relationship between the public and Government. 11

12. Statistical overview • CRIMINAL PROCEEDINGS INSTITUTED AGAINST EMPLOYEES CHARGED WITH FINANCIAL MISCONDUCT • Criminal proceedings were instituted against employees in 210 (24%) of the cases. • In 505 (58%) of the finalized cases, no criminal proceedings were instituted against employees and this shows tolerance of unethical behavior. • In 98 cases (11%) departments failed to provide any indication whether criminal or any other proceedings were instituted against employees charged with financial misconduct. 12

13. Trend Analysis of cases reported • INCREASE IN THE PERCENTAGE OF SMS MEMBERS CHARGED WITH FINANCIAL MISCONDUCT 13

14. Trend Analysis of cases reported • There has been an increase in the percentage of SMS members found guilty of financial misconduct from 1.6% in the 2006/2007 to 2.5% in the 2007/2008 financial years. • This is substantially above the percentage of SMS members employed on salary levels 13 to 15 (0.7%), and this gives the impression that SMS members show a greater propensity to commit financial misconduct. This trend needs to be urgently acted upon, to dispel this perceived correlation. • This trend is in line with research by the PSC which shows that 58% of SMS members have identified the need for training in Financial Management as a Core Management Criteria, and that Senior Managers need to understand their procurement and supply chain responsibilities and obtain skills in this regard. 14

15. Findings • Although there is legislation and a framework regulating ethical conduct within the Public Service which aims to promote integrity and ethical conduct, Public Servants at all levels are acting unethically. • Criminal proceedings are not instituted in all instances whereby financial misconduct also constitutes criminal conduct. • The PSC identified instances of inefficient and ineffective control systems within the Public Service.

16. Recommendations • Strengthening the implementation of fraud prevention plans and risk management Departments should have a systematic tracking system of financial misconduct cases. • Improving Investigative Capacity Departments should build capacity and dedicate resources to investigate allegations of fraud and corruption, and to respond to complaints promptly and effectively. • Recovery of debt Departments should establish processes which are supportive of Debt Control, Finance and Loss Control. 16

17. Recommendations • Departments are encouraged to approach the PSC for assistance when they experience difficulties in the reporting of financial misconduct. • In order to ensure data integrity, departments should maintain a database in order to enable the department to accurately report finalized cases of financial misconduct. • Departments should take immediate disciplinary action against transgressors • Departments should ensure that there is strict adherence to internal control systems • Departments should ensure that there is complete implementation of the Code of Conduct 17

18. Conclusion • There is a level of tolerance for unethical behaviour within the Public Service. • Financial misconduct has a negative impact on service delivery as well as the trust relationship between the public and the Government. • Whilst there is legislation, a framework and systems in place to regulate ethical conduct, it is the human element which is the source of risk. • Ineffective and inefficient control systems contribute to unethical behaviour. 18

19. THANK YOU!

20. We kindly request that the following people sign their official registration forms: • Vusumuzi Winston Mkhabela • Clement Madale • Kobetjie Madike • Mkuhululi Mntuyedwa • Andre Snyman • David Kutuma • Those who not as of yet signed the attendance register must please do so for certification purposes.