A confidential South African Police Service (SAPS) risk-based and compliance draft internal audit report has unearthed a massive R1.6-billion in irregular personal protective equipment (PPE) procurements by the SAPS that took place in just six months of 2020.
The amount includes R11-million paid out on a verbal order in May 2020 to a “non-profit” company, Dr Love Foundation, “who could not be traced on Treasury’s Database of Small Business Development”, the audit noted.
The tender for cloth masks and sachets of hand sanitiser was awarded after “the supplier wrote a correspondence to SAPS stating that his foundation intends to offer services and assistance to SAPS in the current fight against the pandemic”.
The 27-page “Draft Audit Report, Division Supply Management 2020/21, File Reference C23/3/21”, dated September 2020, covered transactions from March 2020 to August 2020 and which did not form part of the Auditor-General’s sample.
The delegation of authority within the SAPS does not provide for verbal authorisation on transactions of more than R500,000. Despite that, “Thirty four (34) orders to the value of R1,620,964,361.20 were issued on the basis of a verbal authorisation, and without obtaining sufficient number of quotations,” reported Major-General DT Nkosi, SAPS chief audit executive.
The audit was performed in accordance with the SAPS Internal Audit Plan for the year ending 31 March 2021 and as approved by the audit committee.
The draft audit was sent to nine members of the SAPS top leadership, including National Commissioner Khehla Sitole, Lieutenant-General Francinah Vuma, Deputy Commissioner: Asset and Legal Management; and Lieutenant-General Sindile Mfazi, Deputy National Commissioner, Crime Detection.
The review found that “current key controls in respect of Covid-19 procurement of PPE were not effective”.
The report has recommended that all procurement orders which were authorised verbally within the division supply chain management and where sufficient quotations were not obtained “are registered, investigated and accounted for accordingly in line with the National Treasury framework on Irregular Expenditure”.
It also recommended that a forensic investigation should be instituted to determine whether there was any intention by suppliers to defraud the state.
The report points to a serious lack of management, stating that “the principal safeguard against fraud, misstatement and irregularities is an effective system of internal control”.
In this instance, the chief investigator could also find “no evidence on file to suggest these procurement cases were duly evaluated prior to obtaining verbal authorisation”.
For example, an order totalling R95-million and dated 2 August 2020 issued to Emergency and Response Equipment had been “wrongfully awarded”, the audit found.
“The bidder (Tekenberg) who was the lowest in price of R91,500,000.00 was unfairly disqualified on the basis that paragraph 2.10 on page 3 of the SBD 4 was incomplete,” the audit found.
Emergency and Response Equipment had also submitted an invalid sworn affidavit, noted the report.
Another order totalling R2.4-million was issued on 1 July 2020 to Vusimuhle Projects, which was also not tax-compliant.
Two other orders, dated 5 and 20 April 2020 for R16,250,000 and R6,402,500 were issued to Tsutsumani Business Enterprises, another tax non-compliant supplier.
The same pattern was found for two 4 April 2020 orders, one for R59-million to Tsa Bophelo Medical and the other for R2,250,000 to supplier Peo Ya Africa, whose “overall tax status could not be determined”.
The report looked at an order dated 3 April 2020 to the value of R36,052,500 that had been issued to Related IT Connexions.
“According to the Written Price Quotation submitted on the closing date of 29/03/2020, the unit price including VAT was R20.9 for a quantity of 100,000 surgical masks.
“This was followed by a supplier pro-former [sic] quotation dated 30/03/2020 with the quantity increased to 1,500,000 at the unit price of R20.90 VAT inclusive which brings the total value of the transaction to R31,350,000.00.”
Verbal authority had been given for the procurement and the amount recorded was “R36,052,500 which is R31,350,000.00 plus 15% VAT. Therefore an amount of R4,702,500 was overcharged,” the report highlighted.
Another supplier, Basarwa Construction, had been issued an order to the value of R3,795,000 and dated 3 April 2020, overcharging SAPS by R495,000.
“Furthermore, the quotation was received on 02/04/2020 while the closing date for the quotation was 01/04/2020. However, the quotation was processed and business was awarded to the supplier.”
The Dr Love Foundation, a non-profit company, was awarded a contract for R11,025,000, as stated earlier, on a mere verbal order in May 2020.
The review found overall that prices charged by suppliers of various PPE orders “were not in line with the National Treasury tariffs” relating to Covid-19 procurement.
“While we take note that value was received on the delivered items, “the difference in prices cost the Department a financial loss of approximately R163,944,42o”.
The unit price of R3,640 paid to company WE Network and Telecommunication per 5l of scrub soap, noted the review, “appeared to be inflated”.
The Divisional Commissioner of Supply Chain Management, Major-General Johannes Riet, wrote on 19 January to the Chief Financial Officer, Lieutenant-General Avhashoni Ramikosi, “articulating the need and budgetary requirement in response to Covid-19”.
These needs, noted the report, were based on the “strength of 190,000 members as well as awaiting trial prisoners.
“The majority of the procurement files did not have functional approval. Therefore it is not clear in the procurement fille how needs were determined prior to advancing service providers for quotations and acquisition of goods,” noted the audit.
The absence of an audit trail “made it impossible for us to determine whether the needs arose from end-users’ requests on stock shortages”.
With regard to the procurement of “surgical sterile gloves” meant for the Department of Health only, the review found that: “There is no motivation in the files substantiating a need to utilise these types of gloves. We noted with great concern that orders issued to some suppliers were not prescriptive in terms of correct description of the gloves needed as stated in the request for quotation.”
Invoices from suppliers did not contain descriptions of the goods, it was found.
The report has recommended that all procurement orders which were authorised verbally and for which sufficient quotations were not obtained be “registered, investigated and accounted for accordingly in line with the National Treasury framework on Irregular Expenditure”.
The audit noted that “management has the responsibility to interrogate, beyond the sample size that internal audit had identified, findings/deviations in order to take appropriate actions based on the recommendations by internal audit”.
It also noted that the findings in the report should not be considered “exhaustive”, but should serve to highlight “potential effects” of the issues identified and “possible remedial actions”.
Risks to the Strategic Objectives of the SAPS needed to be managed “to an acceptable level”, concluded the report. DM
"Everything is flux" ~ Heraclitus
Daily Maverick © All rights reserved