Background
A key pillar of public accountability is the effective, efficient and economic use of public resources. Sound financial management practices are required if such accountability is to be effectively discharged. To this end, government departments must apply effective controls and put in place mechanisms to identify and combat risks associated with their financial management. It is on the basis of this and in executing is constitutional mandate that the Public Service Commission compiled its sixth edition of the report on financial misconduct covering the 2007/08 financial year. The report provides statistical overview and analysis of the information provided by national and provincial departments on financial misconduct cases reported to the Public Service Commission for the 2007/08 financial year.
Key findings
1. Reports from departments:
* All national departments submitted their financial misconduct reports for the 2007/2008 financial year.
* Of the 35 national departments, 13 departments indicated that they had no cases of financial misconduct for the financial year provincial departments.
* Of the 108 provincial departments, 107 have submitted financial misconduct reports to the PSC.
* A total of 54 provincial departments indicated that they had no financial misconduct cases for the financial year.
* Only one department in KwaZulu-Natal province did not submit a financial misconduct report to the Public Service Commission (PSC).
2. Number of employees charged with financial misconduct:
* A total of 868 cases of financial misconduct were reported for the 2007/08 financial year, compared to 1 042 cases during the 2006/07 financial year. This indicates a 17 percent decrease in cases of financial misconduct.
* National departments reported 316 cases while provincial departments reported 552 cases of financial misconduct.
* Figures relating to the national departments indicate a decline from the 2006/07 financial year from 370 to 316 during the 2007/08 financial year, which represents an overall decline of 14 percent.
3. Types of financial misconduct reported:
* The PSC found that cases in the category “fraud” comprise a significant portion 428 (49 percent) of the overall number of cases reported. This figure was even higher in the 2006/07 financial year, where this category accounted for 615 (59 percent) of the reported cases.
* The category “theft” comprises the second highest number of cases at 113 (13 percent).
* The KwaZulu-Natal province followed by national departments have reported the highest number of fraud and theft cases at 177 (33 percent) and 169 (31 percent) cases respectively.
* The high number of cases reported in the KwaZulu-Natal province, is as a result of the social grant fraud cases reported by the Department of Health
* With regard to the 169 fraud and theft cases reported by National Departments, 60 (36 percent) of the cases emanated from the Department of Justice and Constitutional Development.
4. Levels of employees charged with financial misconduct:
* The Report reveals that the percentage number of employees employed at salary levels 1 to 8 (85.9 percent) as at 30 May 2008, correlates closely with the percentage of finalised misconduct cases reported on this level (86.2 percent).
* Although the highest number of cases was reported on salary levels one and eight, proportionally these levels represent the highest number of employees in the public service. Using the same comparison between the total number of employees at the Senior Management Service (SMS) level (0.7 percent) and the percentage of the total number of finalized misconduct cases in respect of SMS members (2.5 percent) for the 2007/08 financial year, the outcome suggests that employees in the SMS have a greater propensity to commit financial misconduct. The PSC is concerned about this trend given that SMS plays a critical role in the promotion and maintenance of sound financial management and are the primary stewards of public resources.
* There has been an increase in the percentage of Senior Management Service members at salary levels 13 to 15, who were found guilty of financial misconduct from the 2006/2007, (1.6percent) to the 2007/2008 (2.4percent) financial years.
5. Outcome of financial misconduct cases and sanctions imposed:
* The PSC found that of the 868 finalised financial misconduct cases reported, employees were found guilty of misconduct in 709 (82 percent) cases.
* Final written warnings were issued in 247 (34.4 percent) cases, and this was the most prevalent sanction imposed upon a finding of guilty.
* It was followed by 163 (22.7percent) cases in which employees were dismissed from the public service.
6. 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 R21 776 948.93.
* During the same financial year, the PSC found that R8 805 596.00 (40 percent) of the R21 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.
* Not all departments indicated the cost of financial misconduct and the amounts that have been recovered. Thus, the cost of financial misconduct and the recovery thereof may consequently be more.
Recommendations
The PSC recommends the following to contribute towards the improvement of the efficient, economic and effective use of financial resources in the public service:
* A clear definition of financial misconduct is imperative. The PSC found that departments experience challenges in defining and understanding what financial misconduct entails. The relevant prescripts that deals with financial misconduct in the public service such as the Public Finance Management Act (PFMA) and Treasury regulations do not provide for a definition, the PSC recommends that the types of financial misconduct as defined in the Report be utilised as guidelines by departments to report finalised misconduct cases to the PSC once a case is finalised.
* Investigative capacity of departments needs to be jacked up. It is imperative that departments have adequate strategies and resources to deal with risk associated with financial misconduct, appropriately. Thus, the PSC recommends that departments build capacity and dedicate resources to investigate allegations of fraud and corruption, and to respond to complaints promptly and effectively.
* Strengthening implementation of fraud prevention plans and risk assessments. The PSC recommends that departments should have a systematic tracking system of financial misconduct cases. This forms an integral part of an effective risk management strategy and should feed into the fraud prevention and risk assessment processes of departments.
* Recovery of debts. Departments must ensure that debts are recovered in accordance with the relevant legislation governing the recovery of monies owing to the state. Monies owing to the State that are not recovered timeously will impact on the department’s budget and eventually have a negative impact on service delivery.
* Improved reporting on the recovery of debts. The PSC found that the inputs received from departments in relation to the recovery of losses relating to financial misconduct were inadequate and observations that the PSC made during the data verification visits in relation to the recovery of debts indicated similar challenges. Thus, the PSC recommends that department’s follow-up on payments made by employees during the recovery of losses resulting from financial misconduct.
Conclusion
Given the fact that Public Service managers operate in a complex environment, they should ensure that they are knowledgeable of the legislation, internal policies and procedures relating to their sphere of work. This will enable them to detect potential fraud and/or any other form of financial misconduct timeously and take corrective action.
Although disciplinary action is considered to be a corrective measure, managers should ensure that when an employee is found guilty of financial misconduct, prompt action is taken against the said employee. This would serve as a deterrent, and should discourage other employees from engaging in similar misdemeanours.
For enquiries please contact:
Humphrey Ramafoko
Tel: 012 352 1196
Cell: 082 782 1730
Issued by: Public Service Commission
3 September 2009
Source: Public Service Commission (http://www.psc.gov.za)
