Treasury chastised for errors in ‘irregular’ R1bn IT project

The National Treasury, the watchdog responsible for sound financial management in the government, has come under fire from parliament’s standing committee on public accounts (Scopa) for its mishandling of a project valued at more than R1bn. The Special Investigating Unit (SIU) has found the project to be irregular.

Scopa chair Mkhuleko Hlengwa criticised the department on Wednesday for persisting in claiming the project was above board despite evidence to the contrary. Hlengwa said this was a “glaring indictment” of the Treasury, urging the department to acknowledge its mistake.

For nearly two decades, the Integrated Financial Management System (IFMS) project has undergone various iterations of planning and implementation. Its primary objective was to unify the financial management of national and provincial departments into a comprehensive system. Despite considerable time invested, a functional system is yet to materialise — resulting in the Treasury incurring expenses for technical support and maintenance, except in 2023/24.

The delay impeded digitalisation of government processes.

The auditor-general qualified the Treasury’s 2021/22 financial statements because of what was seen as fruitless and wasteful expenditure on the contract.

Blacklisting

The Treasury has consistently maintained that there was no corruption involved in the contract with Oracle, which the SIU has referred to the Treasury for blacklisting.

“You can’t have a project within the purview of National Treasury handled like this.

“It must sit as an indictment on you that you have a project of this magnitude 20 years later,” Hlengwa said.

This set a bad example for the rest of the government, he said. The Treasury had to be held to the highest standard.

Deputy finance minister David Masondo told committee members that the Treasury held itself to the highest standards in terms of governance and financial management. But he conceded that the handling of the project may have fallen short of these standards.

At Masondo’s request, the committee gave the Treasury three weeks to deliberate on the committee’s viewpoints and submit a report on the way forward. Hlengwa will seek parliamentary approval for a meeting to consider the report before the general election on May 29 as he wants the matter to be concluded before the next session of parliament.

Leonard Lekgetho, lead investigator of the SIU probe into IFMS under a 2020 presidential proclamation, told MPs the SIU had found that an irregular supply chain management process was followed in awarding the contract. It also found noncompliance with supply chain management policies and legislation, a conflict of interest and fruitless and wasteful expenditure.

Two disciplinary referrals against officials had been made to the Treasury, as well as a blacklisting referral and five criminal matters referred to the National Prosecuting Authority.

Lekgetho said that the SIU maintained the veracity of its findings even after the representations by the Treasury, which were thoroughly reviewed and evaluated. The Treasury was advised of this on March 22 and that the SIU’s findings remained unchanged.

Treasury director-general Duncan Pieterse disagreed with the SIU’s findings that the contract was awarded irregularly, that procurement processes were not followed and that there was fruitless and wasteful expenditure.

SIU head Andy Mothibi said that after considering the Treasury’s representations, the SIU would proceed to institute civil proceedings in the special tribunal for the contract to be cancelled, and if necessary money recovered. He criticised the Treasury for spending money on a project that had not produced a product or results.

Mothibi said a report was being finalised and would be submitted to the president in April. He insisted that the findings of the SIU investigation had legal standing even before the report was submitted to the president, allowing for immediate legal processes.

This was in response to Pieterse’s view that the Treasury was constrained until a final report had been submitted to the president. “The completion of the SIU report will inform the way forward for IFMS,” said Pieterse. “Implementation activities are on hold to await the outcome of the SIU investigation.”

Negotiations with Oracle for implementation of a cloud solution have also been put on hold pending finalisation of the SIU report. Pieterse said the Treasury may pursue a new direction for IFMS.

He said the Treasury had agreed with the department of public service & administration’s plan to proceed with development of a human resource management system as long as it was interoperable with IFMS at a later stage.

ensorl@businesslive.co.za