Messy “lapses in governance”‚ blamed for the misspending of R1.2-billion on an aborted plan to introduce an integrated financial management system across the government‚ have the potential to bring the Treasury into disrepute‚ acting director-general Dondo Mogajane concedes.
Mogajane and a team from the Treasury were urgently called before Parliament’s appropriations committee on Friday to answer questions about spending on the project‚ which was abandoned with cabinet approval in 2013 after about eight years of preparation‚ in favour of a better alternative.
The committee meeting followed a leak to the Gupta-owned television network ANN7 of an internal audit report on the project‚ which was conducted in 2015-16. The audit found that the internal control environment for the project was woefully inadequate.
The integrated financial management system project was intended to modernize and integrate all human resource and financial management systems across the government to replace fragmented and outdated systems.
The internal audit inquiry found that financial and operating controls were “non-existent” and that there had been a lack of compliance with laws and regu-lations, the Treasury’s chief audit executive, Lesego Seperepere, told the committee.
The internal audit report was presented to former director-general Lungisa Fuzile in March 2016, following which the Treasury commissioned a forensic investigation by Deloitte in October. Deloitte had finalised a draft report, Mogajane said.
Of the 54 findings of the internal audit report, 49 had a “catastrophic” risk rating and five a high risk rating. A catastrophic risk rating refers to an extremely “inefficient and ineffective operation of controls which needs excessive effort and urgent and immediate attention for improvement”.
The internal audit report also noted inadequate payment procedures and non-existence of budget information. It found a lack of independent quality assurance function, excessive expenditure and expenditure unrelated to the project, along with gaps in agreements with service providers.
The auditors uncovered problems of overpayment to service provider Bitz Technologies. In another example of irregular conduct, Fuzile had to cancel a service-level agreement for R40m, replacing it with a correct one in line with the quote for R28m. Although the annual projected fees to be paid to the company were R7.8m, it was paid R12.3m. There was also no sign-off or approval of invoices paid.
Acting accountant-general and manager of the project Lindy Bodewig said the first version of the integrated financial management system referred to three project reviews by the World Bank, Ernst & Young and Gartner. All of them proposed a different IT architecture to the hybrid one of internally developed solutions that the Treasury initially planned but which had run into institutional and technological challenges. Another problem with the hybrid solution was that the maintenance costs over the life cycle of the project would be “prohibitive”.
The cost of the new “off-the-shelf” system would have been within the original R4.3bn budget, including the R1.2bn spent on the first phase that has since been abandoned.
Bodewig said it was envisaged that the planning, design and template development for the new system would end in November 2018, pilot site implementation in November 2019 and lead site implemen-tation in June 2021.