I Kotsoane: Remarks on measures implemented to prevent fraud and
corruption in housing

11 March 2009

Following allegations that officials employed by government and many other
individuals who do not qualify for the housing subsidy were allocated houses
from 1994 to 2004, the Minister of Housing, Dr Lindiwe Sisulu invited the
Auditor-General (AG) to do a detailed audit and review of the Housing Subsidy
Systems (HSS) in order to identify weakness in housing information management
systems that resulted in people who are not supposed to get the subsidy getting
them.

On completion of the audit, the Auditor-General reported that a number of
government officials, municipal officials and private individuals have
fraudulently received houses they were not supposed to receive between 1994 and
2004. The Auditor-General concluded that close to 30 000 officials who work for
government at different levels have fraudulently benefited from the housing
subsidy scheme.

The Auditor-General also found that our systems when we started the housing
subsidy in 1994 were not the best; they had some weaknesses and those
weaknesses led to some officials taking advantage of the system and
participating in fraudulent activities.

The following are some of the weaknesses in our system that existed from
1994 to 2004, we are sharing this with you such that you can help the nation
understand the journey we have travelled as the housing team (national,
province and municipalities to address these problems and to develop systems
that not only identify fraudulent activities but also prevent them.

The Auditor-General identified the following weaknesses from 1994 to 2004,
we had started ourselves by then to review our systems and to introduce more
controls and upgrade technology.

The Auditor-General found that:

* In some cases subsidy approvals were granted to government employees whose
earnings/salaries were in excess of the housing subsidy threshold.
* Some approvals were granted after the applicants' date of death according to
home affairs.
* In some cases duplicate subsidies for the same application.
* Subsidies approved for a specific applicant by more than one provincial
administration across different provinces.
* Duplicate subsidy approvals to a specific applicant and his or her
spouse.
* Subsidy approvals to applicants under the age of 21.
* Duplicate subsidy approvals for a specific property.
* Subsidies awarded to individuals receiving monthly remuneration from the
Government Employees Pension Fund (GEPF) in excess of the subsidy
threshold.
* Subsidy approvals to applicants with invalid identity document (ID)
numbers.
* Manual overrides of the Housing Subsidy System in the approval of housing
subsidies resulting in fraudulent activities by officials.

Further more after the Director-General and his team appeared before
Standing Committee on Public Accounts (Scopa) the committee directed us to also
rectify the following:

* That the department establishes an ID verification mechanism that is
linked to data in the home affairs database.
* That the department must ensure that policy guidelines with respect to the
administration and awarding of subsidies are enforced.
* The National Department of Housing (NDoH) institutes a comprehensive strategy
of co-operation and integration with provincial departments.

Together with our provincial and municipal partners we have taken a number
of actions to ensure that our systems are able to identify fraudulent
applications, and to prevent officials from creating opportunities for
fraudulent applications to go through.

We have also taken a number of actions to ensure that all the issues
identified by the minister, Minister and MECs (MinMEC), AG, and SCOPA were
rectified:

Action taken to improve the systems and to prevent fraud

* Key to approval of fraudulent applications was the ability of officials to
override the system, today the override of search results on the HSS is no
longer conducted by an individual. The HSS has been enhanced to enforce a
second level of authorisation by a senior official at the level of the Chief
Financial Officer (CFO) or delegated official.

* A junior user scrutinises the search results and determines if an override
is required. In cases where such overrides need to be performed, the junior
user will record the reasons for the override to be conducted and seek approval
from a senior official.

* The senior user, delegated to perform this function by the Chief Financial
Officer, evaluates the details on a case by case basis and approves or declines
the request for an override. A real time report is available on HSS online
indicating the various search overrides conducted over a specific period.

* Also not available in the early days of the subsidy was the ability to
verify information with other state agencies, today we have a checking
mechanism built into the HSS, based on the formula provided by the Department
of Home Affairs (DHA) to confirm the validity of an ID, will prevent the
capturing of any invalid IDs.

* The IDs captured on the HSS are selected by the provincial housing
department and submitted for overnight searches against the Population
Register, via HSS online. The outcome of the search results is available to the
provincial housing departments the next morning.

* In addition, the department has enhanced the Housing Subsidy System's
application verification mechanism. The system now also tests applications
against the Personnel Administration and Salary Systems (Persal), Government
Employee Pension Fund, Unemployment Insurance Fund (UIF), Deeds Office and
other government agencies and through PERSAL we are able to verify government
employee salary data.

* Provincial housing departments are upgrading their filing systems,
information management and data capturing systems in accordance with the
provisions of the National Archives and Records Services Act (43 of 1996), data
and document management protocols and intensive training is being
implemented.

* A Joint Standing Committee (JSC) consisting of officials from the DoH,
provincial housing departments, State Information Technology Agency (SITA) and
the Auditor-General (as an observer) is established to give oversight on the
implementation of systems.

Municipal audit report

The Auditor-General also reported that between 1994 and 2004: 6 905
officials were identified during the audit as having received houses they were
not suppose to receive.

The SIU is assisting provinces in investigating the cases identified by the
audit for both municipal officials and government officials. The presentation
by the SIU will cover our progress and the road we will still have to
travel.

Decision to prosecute all officials

Following the report of the AG and the process to enhance, upgrade and
modernise our systems across all spheres of government the Minister and the MEC
(MinMEC) had to decide what to do with those who benefited from fraudulent
applications. This included officials of government, officials working for
municipalities, private individuals and other role players in the housing value
chain like conveyances and project managers.

MinMEC resolved that we must approach the Special Investigation Unit to
investigate, prepare cases for all who are found to have a case to answer for
and recover the money and invest it back into housing. We also agreed that all
government officials when the prosecution process is completed we must all
encourage their departments and municipalities to take them through
disciplinary processes. The SIU will share more details on how far we are in
all this processes.

We are also very concerned regarding the fraud and corruption by contractors
and developers. We continue to be pained by the impact of their activities as
they leave many poor people in shoddy and low quality houses. They also waste a
lot of state funds. We will also find those contractors, take them through the
systems and ensure that they return the funds back to the State; we will be
harsher on government officials who help them in these fraudulent
activities.

In conclusion before I hand over to the SIU let me say that our commitment
to root our fraud and corruption in housing is very clear, we will prosecute
all officials involved in fraud, we will recover the funds and also take
disciplinary steps and many people would be dismissed from their jobs. As for
contractors and others in the value chain, they must know that we will not
allow them to continue to waste government funds; we will not standby and allow
them to build shoddy houses.

Thank you.

For enquiries contact:
Ndivhuwo Mabaya
Cell: 083 645 7838

Issued by: Department of Housing
11 March 2009
Source: Department of Housing (http://www.housing.gov.za)