Finance Minister Malusi Gigaba and some members of his staff.
Finance Minister Malusi Gigaba and some members of his staff.

Tensions are starting to show between Finance Minister Malusi Gigaba's office and the Treasury as allegations of suppressed investigations and the running of parallel structures have surfaced.

Cracks emerged this week as the Treasury wrangled with the office of the auditor-general over a R571-million contract awarded for the multibillion-rand Integrated Financial Management System. The system was envisioned to integrate all government payments into a single platform.

The row includes allegations by Gigaba's backers that former finance minister Pravin Gordhan's administration, led by his director-general, Lungisa Fuzile, failed to act on an audit committee report on irregularities in the IFMS contract for more than a year. They allege the report was handed to Fuzile in March last year, but no action was taken.

Treasury officials sympathetic to Gordhan hit back by alleging Gigaba was jeopardising the Treasury's "clean" reputation to tarnish his predecessor's legacy. "We cannot sit by and allow them to rubbish all the good work by Treasury for years just because they want to target Lungisa and PG," said a Treasury source, who asked not to be named.

The auditor-general wants to give the Treasury its first-ever qualified audit finding over the IT contract awarded, under the IFMS banner, to ICT Works without going out to tender.

The finding could be particularly damaging to the credibility of the department, which is mandated to ensure transparency, accountability and sound financial controls in the management of public finances.

The Treasury has always been seen by investors and ratings agencies as having maintained high standards of financial management itself and across government.

Gigaba was appointed finance minister in March during a late-night cabinet reshuffle by President Jacob Zuma. This was seen in some quarters as yet another attempt to decimate the Treasury, which had taken a combative stance against corruption.

Zuma's appointment of Gigaba was seen by many as a further attempt to capture a department standing in the way of questionable transactions involving his friends.

The Treasury confirmed last week that it was involved in a "process of engagement" with the auditor-general, saying issues, including the company ICT Works (which was awarded the IFMS contract), had been flagged.

"The audit process is a critical process to ensure accountability for performance, and its integrity must be respected and the process allowed to be completed before any comments are made in public," it said, adding that it was concerned about the motives of those who leaked the information.

It disputed the view that nothing had been done when the irregularities were raised. "The chair of the audit committee, amongst recommendations, requested the DG [then Fuzile]) to appoint a forensic investigation. Lungisa Fuzile approved the recommendations and the process of finalising the forensic investigation is ongoing."

Although it was not allowed to discuss details of the audit, the department said the ICT Works contract was awarded in the normal tender process prescribed by the Public Financial Management Act and backed by legal opinion obtained by the department.

A staffer said there were other allegations, including that Gigaba did not defend the Treasury after media reports in The New Age this year alleged corruption in the programme. Another staff member said senior department officials felt sidelined by Gigaba's office through exclusion from critical meetings, which were instead attended by advisers and other officials in the ministry.

Several Treasury staff members, including deputy directors-general, have threatened to resign if Gigaba appoints a forensic investigation into the IFMS.

Disgruntled civil servants say the department's internal audit committee is sitting on an investigative report by Deloitte that found no malfeasance in the deal. The report, issued to the Treasury's internal audit committee in March, investigated a litany of alleged irregularities uncovered by the department's internal audit unit.

A staffer sympathetic to Gigaba said the minister became concerned when The New Age newspaper and ANN7 TV aired allegations of corruption and misuse of hundreds of millions of rands that were not acted upon. Allegations included claims that the programme's R145-million, five-year budget was depleted by R139-million in the first year, and that problems were identified with agreements signed and payments made, including one company being paid R11-million more than contracted for.

"The issues with the AG only made things worse because his detractors were also going to use that against him," the staffer said.

Another official, with intimate knowledge of the Treasury's internal audit unit, said Gigaba needed to be seen to be acting. "We are talking about billions of rands ... People are looting here and the minister needs to stop everything, suspend people, including the head [of the IFMS], and then institute a forensic investigation into all this.

"The department can avoid a qualified audit if they note this as irregular expenditure in their own financials. If this is condoned, we will still achieve an unqualified audit with matters of emphasis. This fighting of the AG is exactly the same thing we tell other departments and SOEs [state-owned enterprises] not to do," said the source.

Africa Boso, spokesman for the auditor-general, said that although he could not discuss details of an ongoing audit, the Treasury's audit had gone past the statutory deadline of July 31 "due to matters of interpretation and areas of disagreement between management and auditors".

He said: "It is not unusual for sign-offs of audits to be held over into August and even beyond while auditors and management are engaged in an effort to resolve the contentious issues arising from an audit. We are now in that process as far as National Treasury statutory accounts are concerned."

The Sunday Times has seen internal correspondence from Treasury director-general Dondo Mogajane to staff in the wake of the reports on the IFMS.

In a letter dated June 9, Mogajane reiterated the Treasury's support and respect for the internal audit unit's independence and role to monitor and improve processes. He also reiterated that the Treasury had approved recommendations for an independent forensic audit, whose report would be given directly to the audit committee.

Mogajane wrote: "It should be noted that nowhere in the internal audit unit report is there any allegation of corruption made against any current or former staff member of the National Treasury, and Treasury therefore strongly rejects attempts to rush to defame or cast aspersions against any current or former member of staff ... without taking into account the process initiated by the Treasury and its audit committee."

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