Management of Conflicts of Interest through Financial Disclosures
8 November 2007
In line with its Constitutional mandate, the Public Service Commission (PSC)
devotes a significant portion of its efforts to the promotion of professional
ethics in the public service. One of the key aspects to promoting integrity
within government is through the management of potential and actual conflicts
of interest of senior managers through the disclosure of financial interests.
Senior managers in the public service are entrusted with public funds and by
implication, public trust. Therefore, it is expected of them to maintain a high
standard of professional ethics. It was with this in mind that the Financial
Disclosure Framework for senior managers was introduced and regulated in the
South African public service. The PSC's Report on the Management of Conflicts
of Interest through Financial Disclosures reflects on the management of
conflicts of interests and the submission of the financial disclosure forms for
the period 2000-2005. This media release highlights some of the Report's
salient points.
The process of disclosing financial interests
It is assumed that many people, including public officials have a wide
variety of interests, which may include social and economic interests. It is
possible that such interests could be complimentary or in conflict with the
work environment of a person. If such interests are not appropriately managed,
they could pose a dilemma for an organisation and subsequently its
integrity.
Although a recent development in the South African public service, the
disclosure of financial interests by public servants is a world-wide phenomenon
with countries such as the United States of America (USA), Botswana, Canada,
Australia and India having already implemented it for a considerable time.
The primary aim of the Framework is to manage potential and prevent real
conflicts of interest from occurring. In terms of the Framework all members of
the Senior Management Service (SMS) are required to disclose their financial
interests by 30 April each year to their Executing Authorities. Executing
Authorities must then submit a copy of the financial disclosure form to the PSC
by 31 May.
Key findings of the Report
The extent to which the financial disclosure forms were submitted was
assessed with a view to provide a statistical analysis of all disclosures that
were received by the PSC for the financial years 1999/2000 to 2004/05. In
addition, the research and subsequently the Report sought to point out problems
that were encountered throughout the period and to propose recommendations that
would proactively address these problems, thereby strengthening the Financial
Disclosure Framework and ensuring that disclosure requirements are better
complied with in the future.
A random sample of three hundred (300) forms per financial year was further
assessed to determine whether potential conflicts of interest exist. The sample
covers departments at national and provincial level. However, it should be
noted that the PSC had to analyse the financial disclosures with very little
information to enable the informed identification of potential conflicts of
interest. For instance, critical information on job content is not provided on
financial disclosure forms and as such the PSC had to make certain
assumptions.
The Auditor-General, as requested by the PSC, reported on the declarations
by SMS members who have directorships in companies and close corporations. In
its report on the declarations of interest by Ministers, Deputy Ministers and
government employees, published in 2006, the Auditor-General identified 1581
senior managers who are directors or members in companies or close
corporations. From the cases (1 581) identified by the Auditor-General, it was
found that a total of 835 SMS members are involved in private companies that
could pose a potential conflict of interest. This represents 53% of the total
cases that were assessed.
The Report notes that the submission of the financial disclosure forms since
the implementation of the system has not been satisfactory. In the first
financial year (1999/2000) the PSC received 61% of all disclosures. Between
2001 and 2003 there was a steady increase in the submission of financial
disclosure forms which indicated willingness among designated officials to
disclose and comply with the Public Service Regulations. In the financial year
2004/2005 disclosures stood at 77%.
Although the submission of forms by national departments has reached on some
occasions an average of 80% or more, the submission of forms by provincial
departments leave a lot to be desired, with provinces only recording 17% and
26% in certain financial years. While it applauds compliance by a considerable
number of officials, the PSC believes that only 100% compliance will
suffice.
The Report states that in terms of provincial departments, the SMS members
of the Western Cape and Eastern Cape Provinces identified by the
Auditor-General may have the highest number of potential conflicts of interest.
In terms of national departments it was found that the SMS members of
Statistics South Africa with 92% and the department of Communications with 90%
may have the highest number of potential conflicts of interest. The area of
government administration where potential conflicts of interest are most likely
to appear is in financial management (procurement, auditing and accounting,
etc.).
Recommendations
In order to strengthen the Financial Disclosure Framework and thereby manage
potential conflicts of interests in the public service, the PSC proposes the
following:
* A comprehensive framework to identify and manage conflicts of interest be
introduced. This should coincide with the PSC developing rules to structure the
identification and management of potential conflicts of interests.
* That penalties and or fines be imposed for non-compliance with the
Framework.
* That Heads of Department play a more active role in the management of the
financial disclosures and the identification of potential conflicts of
interest.
* That an electronic Financial Disclosure Framework be introduced.
* That Ethics Officers be appointed in all national and provincial
departments.
* That compliance with the Financial Disclosure Framework be linked to the
Performance Agreements of SMS members.
Conclusion
In terms of the Framework the PSC has an important role to play with respect
to the scrutiny of the financial disclosure forms, to identify potential
conflicts of interest and alerting Executing Authorities. This role could be
performed optimally only if all disclosure forms are received by the PSC.
There is still a significant number of senior managers who fail to disclose
their financial interests, i.e. their assets, shares and other financial
interests in private and public companies and other corporate entities
recognised by law. Regrettably, without appropriate disclosures, potential
conflicts of interest cannot be identified and managed effectively. These
records play a significant role in alerting government to an official's
possible conflicts of interest.
This Report is therefore published in the hope that it will contribute
towards the building of integrity amongst senior managers by promoting
transparency and accountability in the disclosure of their financial interests
and in so doing engender public trust.
The PSC will continue to monitor the performance of the South African Public
Service and through its reporting generate a broader discussion and debate in
the good governance and service delivery discourse. This and other reports can
be accessed on the PSC website www.psc.gov.za. Acts of possible corruption can
be reported to the National Anti-Corruption Hotline - 0800 701 701.
For enquiries, please contact:
Humphrey Ramafoko
Director: Communication and Information Services
Tel: 012 352 1196
Cell: 082 782 1730
E-mail: ramafokoh@opsc.gov.za
Kabelo Ledwaba
Deputy Director: Communication
Tel: 012 352 1070
Cell: 082 952 0460
E-mail: kabelol@opsc.gov.za
Issued by: Public Service Commission
8 November 2007
Source: Public Service Commission (http://www.psc.gov.za)