Joburg hands contracts to own employees

The City of Joburg has awarded contracts for services worth nearly R100-million to its employees, civil servants employed by other state departments and even to a company that has been blacklisted by the Treasury from doing business with government. This is according to Auditor-General (AG) Terence Nombembe’s final management report on the city’s performance during the 2011/2012 financial year. The AG’s report showed some of the council’s employees were directors of more than 10 companies which provided services to the total value of R69m. And despite the city’s justifications for the violations of its own supply chain management policies in awarding the contracts, the AG found that lack of review and monitoring with applicable laws was the problem.

The city has also been found to have deviated from supply chain management policies in contracts totalling almost R17m, including deviation for the extension of a contract for the city’s website migration. Other deviations included the extension of scope of work for provision of services with the macro surveillance closed-circuit television of the city which cost more than R5m and payments to facilitators of Rea Vaya phase 1A negotiations with taxi owners. In addition to this, there were 50 other companies that also were contracted to provide services to the city, with payments totalling more than R20m, who were employed by other state departments, including those employed in the Gauteng premier’s office.

The city’s management said in its response it currently had no access to a database to detect employees in the service of the state who might have been doing business with it. “Mechanisms to manage and control these findings are by checking all directors’ identity numbers against the city’s payroll prior to any awards by the respective bid adjudication committees,” said Jan Keefer of the city’s legal and commercial committees in response to the AG’s findings. “Prior to the accreditation process of suppliers to the city’s database, the credentials of the directors are also checked. “Service providers affected or raised under this exception are now blocked.”

The AG has told the city’s management to commit to liaising with the National Treasury to prevent a repeat of the violations. Last month Nombembe released a damning report on the national and provincial outcomes, which showed nearly R600m in tenders were awarded to suppliers linked to employees of the relevant departments, and in some cases senior managers were responsible for the awards. Last November, the Public Services Commission also called for public servants to be barred from doing business with the state after it found an alarming increase in the cost of financial misconduct. According to the commission, in 2008/09 financial misconduct cost the state R100m.

The next year, the figure more than tripled to R346m. Then in 2010/11 it almost tripled again, to stand at R932m. The commission’s director-general, Richard Levin, complained of a “culture of no consequences” and said he hoped the number would not hit R1 billion the following year. The AG found that there were internal control deficiencies of finance and performance management of the City of Joburg and that management did not monitor and review supply chain regulations.