SA Post Office Portfolio Committee on Communications Contract Management Overview
The document provides insights into the contract management activities of the SA Post Office Portfolio Committee on Communications for the financial year 2021/2022. It includes information on contracts, expenditures, irregular expenditure, procurement regulations, and financial misconduct. Key highlights include contract values, spends, expirations, and the impact of procurement regulations on the bidding process. The report also addresses irregular expenditure and the need for consequence management efforts.
- SA Post Office
- Contract Management
- Procurement Regulations
- Irregular Expenditure
- Financial Misconduct
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SA POST OFFICE PORTFOLIO COMMITTEE ON COMMUNICATIONS Contract Value Chain 2021/2022 FY 29 November 2022
Contract Management - SASSA SASSA CONTRACT MANAGEMENT HIGH LEVEL REPORT - SA POST OFFICE (Excl contracts ceded to Postbank) Contracts Expiring # Valid Contracts # Business Unit Contract Value Contract Spend Contract Balance 0-3 4-7 > 7 Months 0 Months 0 Months 12 11 SASSA / Security 12 789,986,354 411,316,595 378,669,759 12 SASSA / Operations 0 2 0 2 7,927,606 797,913,960 4,486,203 415,802,798 3,441,403 382,111,162 # of Contracts 0 2 12 14 SASSA CONTRACT MANAGEMENT HIGH LEVEL REPORT - POSTBANK (Contracts ceded to Postbank) Contracts Expiring # Of Valid Contracts # BU Contract Value Contract Spend Contract Balance 0-3 4-7 > 7 Months 1 Months 0 Months 0 1 SASSA / Finance 1 1,276,577,233 590,057,413 686,519,820 2 SASSA / Operations 14 0 2 16 3 SASSA / Security 1 0 6 7 # of Contracts 16 0 8 24 1,276,577,233 590,057,413 686,519,820 2
Procurement Regulations Treasury Instruction Note 3 of 2021/2022 Requires that prior to inviting price quotations, confirmation is to be provided of: 1. Budget 2. Cash flow and 3. Payment will be made within 30 days or as per contract period. May impact the levels of Irregular Expenditure due to the severe cash flow constraints currently experienced. May result in uncompetitive and unfair bidding process as per Budgetary Review and Recommendations Report (BRRR) by the Auditor General dated 11 October 2022 due to cash flow constraints. 3
Irregular Expenditure Irregular Expenditure refers to expenditure other than authorised expenditure, incurred in contravention of or that is not in accordance with a requirement of any applicable legislation including- The Public Finance Management Act (PFMA); or The State Tender Board Act, 1968 (act no 86 of 1968); or Any provincial legislation providing for procurement procedures in that Provincial Government. The Annual Report of the SA Post Office for 2021/2022 FY indicates an accumulated amount of R2.4 billion as Irregular Expenditure. Item Opening balance under investigation Irregular Expenditure 2021/22 Irregular Expenditure for 2021 identified during 2022 Amount 1,827,462 567,440 44,748 2,439,650 4
Financial Misconduct Committee As indicated in the Budgetary Review and Recommendations Report (BRRR) by the Auditor General dated 11 October 2022: o Inadequate consequence management efforts identified in Auditees o Irregular Expenditure emanating from archaic and legacy systems is unable to be traced to responsible personnel For each instance of Irregular Expenditure, a Consequence Management Assessment Certificate (CMAC) is to be completed and submitted to the FMC for evaluation and determination on any further action that may be required, including Consequence Management. In order to comply with the requirements of National Treasury, a process has commenced whereby all CMACs received from 2016 onwards are in the process of review. Where required, CMACs have been returned to the respective BUs to update and include any outstanding information. Condonation applications will be submitted to National Treasury 5
IRREGULAR EXPENDITURE Integrated Grants Payment System Solutions (IGPS)
Background In 2018 Postbank whilst still a division of SA Post Office went out on tender for the procurement of Integrated Grants Payment System Solutions (IGPS) to process social grant payments on behalf of South African Social Security Agency (SASSA) for a period of 5 years. The contract was awarded to FSS Technology (FSS) and Electronic Connect (EC) Joint Venture at a cost of R43 294 500.00. Joint venture split was 70%-Technical for FSS and 30% Admin for EC. In early 2021, FSS approached Postbank requesting permission to cede the contract to its partner, EC. Due to the fact that the contract was entered into under SAPO, Postbank had to first conclude a cession for a contract to be under its name and the cession was accordingly concluded in February of the same year. A cession between FSS and EC was concluded with the approval of Postbank in May 2021 . After taking over the contract, EC raise the matter of the Switching component of the system not being part of the contract and demanded payment for the years IGPS switch was used by Postbank without paying for it failing which they would switch off the system.
Risk Mitigation To mitigate the risk of switch off and national disaster, Postbank signed Heads of Agreement with EC for the Switch capability to ensure business continuity and to give effect to processing payment. The heads of agreement is not a contract, Postbank was supposed to approach National Treasury for support to enter into a Switching contract subsequently obtain approval internally to ensure that a formal contract for the Switching capability was concluded. That was done even though payment continued to be made based on the heads of agreement which resulted in Irregular Expenditure.
Irregular Payments to date Actual Payments made to EC in relation to the switch amounted to R76 341 702, 12 as at 31 January 2022. Invoices from February until April 2022 have not yet been paid. The total of these invoices amounts to R13 940 328,90. Invoices for the period May until October 2022 have not yet been received. These are estimated at R27 880 657,80.
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