ethics - The Institute of Internal Auditors South Africa

A keen focus on supply chAin mAnAgement
by government will help to build confidence
in our democrAcy
In my previous article I singled out supply chain management (SCM),
commonly referred to as the tender process in South Africa, as one
of the focus areas for national and provincial role players. It is an
area across all spheres of government (national, provincial and local)
on which citizens are raising major concerns as billions of rands are
spent through SCM to procure goods and services.
To ensure proper regulation of procurement/supply chain management,
our country adopted some of the most advanced policies, laws
and regulations in the world. To put this article into context: the laws
and regulations adopted by our country provide clear direction to
the public sector on the manner citizens expect procurement to be
dealt with in the public sector.
The principles of contracting for goods and services in a manner that
is fair, equitable, transparent, competitive and cost effective come
from our Constitution. The Public and Municipal Finance Management
Acts and their regulations (PFMA and MFMA) prescribe the
processes and rules to be followed in the public sector in order to
apply the constitutional principles consistently and correctly and
safeguard the process against abuse. The preferential procurement
framework issued by the National Treasury further gives effect to
the constitutional principle of giving preference to the previously
disadvantaged in the allocation of work by the public sector. Finally,
legislation provides for specific measures to ensure the system is not
abused in order to favour certain officials and their own businesses or
those of their family members or associates.
All citizens hAve A criticAl role to plAy in ensuring
cleAn AdministrAtion
Despite the above measures being in place, supply chain management
is still one of the areas that demand focus from national and
provincial role players.
During a recent series of interviews broadcast on radio stations
on my office’s latest general report on the local government audit
outcomes, many members of the public who called in to these talk
shows consistently raised issues relating to supply chain management
at departments, public entities and municipalities.
They expressed concerns and perceptions that tender processes at
departments, public entities and municipalities are being handled in
a way that financially benefits a few individuals and that laws and
regulations governing SCM are intentionally ignored or flouted by
government officials in order to give state officials and their families
and associates unfair advantage over other competitors or would-be
service providers to government.
Many of the callers asked what my office is doing to curb such mal-
38 | IA ADVISER September 2011
practices. My first response is that,while my office is playing a watchdog
role, all citizens, civil society fraud prevention agencies and leadership
within the public sector have an important
part to play in ensuring that our country’s public administration procures
goods and services efficiently and cost-effectively. Specifically,
members of the public and state employees should continue to report
to the relevant authorities any form of irregularity they detect.
Further, citizens should insist that their elected officials are held accountable
and take steps to ensure that the measures citizens have
assessed as necessary, and therefore voted into law, are adhered to
and enforced.
the role of the Audit office
On our part my office, since 2009, has included SCM as a specific audit
focus area across all spheres of government and identified SCM as a specific
focus area for executive leadership and legislative oversight bodies.
This focus was motivated, in no small measure, by our endeavours to
promote, through auditing, public confidence in our democracy – in
this instance, the aims and objectives relating to supply chain management
legislation and regulations.
The aim of our audits of SCM policies, practices and controls is to establish
whether departments, public entities and municipalities have put
in place effective procurement processes and internal controls that ensure
a fair, equitable, transparent, competitive and cost-effective SCM
system, comply with legislation and minimise the likelihood of fraud,
corruption and favouritism as well as unfair and irregular practices.
leAdership commits to ensuring compliAnce with scm
regulAtions
Our annual audits still continue to uncover many instances of noncompliance
with such regulations. Our 2009-10 MFMA audits included
specific tests to determine if officials or their family members had an interest
in the suppliers of metros and the larger highcapacity municipalities
(40% of our municipalities). We found that awards valued at some
R76 million had been made to employees and councillors of municipalities
and R102 million to their close family members. The AGSA reported
these findings to those charged with governance of the municipalities in
question, including provincial role players, to ensure these instances are
investigated for undue influence and possible fraud; as in many cases
the relationship was not declared by the supplier as required by legislation.
The audits turned the spotlight on this matter and many municipalities
have committed to improving their controls.
The audits of departments and public entities included similar testing
for conflicts of interest. The 2009-10 audits identified incidents