Home Accounting and Auditing AG’s audit of Covid payments is disturbing in the extreme

AG’s audit of Covid payments is disturbing in the extreme

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The Auditor-General’s report on Covid payments since April 2020 makes for disturbing reading. The AG’s report looks at roughly half the R147-billion Covid-related spending for the period from April to July. This was part of the R500 billion announced by President Cyril Ramaphosa at the start if the lockdown.

As Corruption Watch points out: “On the same day that Makwetu was outlining the work done by his team, news of the suspension of UIF commissioner Tebogo Maruping emerged. Employment and Labour Minister Thulas Nxesi is reported to have placed Maruping on precautionary suspension following the findings of the AG on discrepancies in Ters.”

AG Kimi Makwetu remarked that “emergency responses and quick actions are required to save lives and livelihoods, but the easing of controls and the streamlining of processes and procedures to respond to the crisis, expose the government to the risks of the misuse or abuse of public resources.

“We are concerned about the indicators of high risk of fraud and abuse
we observed – not only in the areas that we were able to audit, but also where information for auditing was not forthcoming, which could be a deliberate tactic to \frustrate our audit efforts,” said Makwetu.

By 31 July, the Unemployment Insurance Fund (UIF) had paid just over R37 billion in TERS benefits and the South African Social Security Agency (Sassa) had paid R19,6 billion in social grants.

One of the critical failings was the lack of data integration across different government departments to assess whether people applying for relief actually qualified.

Incorrect TERS benefits

A new system implemented for TERS incorrectly calculated the benefits for the first lockdown period (27 March to 30 April) by not taking into account the actual period of inactivity and the portion of the salary paid by employers, resulting in significant overpayments.
 Through analysing the payment data and checking the beneficiary information against other government databases, a high number of payments were flagged that require investigation. Work is continuing to verify this. These include payments to people who are below the legal age of employment, deceased, working in government, receiving social grants or students funded by the national student financial aid scheme.
 Recalculations of claims and reconciliations with payment data identified
overpayments, underpayments, duplicate payments and discrepancies such as approvals for payments made before the date of application.
 Poor input and validation controls on the new system and a manual claim
submission process used in the first two weeks of implementation further
heightened the risk of invalid or manipulated claim information.

R350 social grants going to people not in distress

There is also a risk that the R350 social relief grant is being paid to people who are not in distress. The application process includes very limited verification to determine if the applicant is receiving other income and provides opportunities for people such as students or scholars older than 18 to also get access to the grant.

Poor uptake for Small Business relief

A total of R1,8 billion was provided to support small, micro and medium enterprises to remain in business during the pandemic.

However, just 1 697 spaza owners had received the grant (in total R5,9 million) by 30 June, against a budget of R175 million. A control weakness in the approval process was identified, which the department is attending to, says the AG report.

Corruption Watch flags troubling aspects of AG report

Corruption Watch has highlighted its concerns about the AG’s report.

  • Exorbitant spending against suppliers when compared to their pre-Covid-19 spending Suppliers used for the first time during the Covid-19 period
  • Bank account numbers that were different from the details on the Central Supplier Database system
  • Payments processed through sundry payments
  • Large round payments made to suppliers
  • The tax compliance status of some of the large suppliers also came into question.

Poor record-keeping and lack of coordination and information-sharing for projects that run across multiple government institutions meant that already deficient procurement systems were further compromised, said Makwetu. While in some cases errors were the cause for concern for his team, the abuse of the new environment by others also crippled efforts.